All change: how to keep up to date with payroll changes

With several new starters, and an 11 year veteran leaving Keytime Towers for pastures new, I've had plenty of practice recently with HMRC's new in-year filing process, which I went through last time (http://u-clock.blogspot.com/2010/03/in-year-filing-budget-what-you-need-to.html). It was all nice and easy, so it is well worth getting started before it becomes compulsory for businesses with fewer than 50 employees in April next year.

This month, my thoughts turn to keeping up to date with all the latest changes to payroll legislation; with the second Budget of the year rapidly approaching, there could be significant changes on the horizon.

I've jotted down some key reminders below, to help you keep up to date, and included some useful links for keeping on top of things as we come out the other side of the Budget.

First up is P11D, with the looming deadline on July 6th. Don't forget to get your forms in!

Next, we have changes to the State Pension age for women, which will slowly increase from 60 to 65 over the next 10 years. The method HMRC have chosen is to phase in the change on a sliding scale, which will affect women born between 6th April 1950 and 5th April 1955.

In general, employees over the State Pension age do not have to pay employee's National Insurance Contributions (NICs) (while employers pay Class 1 Category C NICs for those employees). With the new sliding scale, employers will have to calculate the new state pension age for affected women, and continue to deduct Class 1 NICs up to the new date.

The table below shows how the state pension age changes during this year:

Date of Birth	New State Pension Age Date	State Pension age (in years and months)
06/04/50 to 05/05/50	06/05/2010	60.1
06/05/50 to 05/06/50	06/07/2010	60.2
06/06/50 to 05/07/50	06/09/2010	60.3
06/07/50 to 05/08/50	06/11/2010	60.4
06/08/50 to 05/09/50	06/01/2011	60.5
06/09/50 to 05/10/50	06/03/2011	60.6

You can calculate the State Pension age for your employees with a HMRC tool – check the useful links section for details.

It is very important to ensure that you have accurate dates of birth for all employees to calculate when they no longer need to pay Class 1 NICs.

And finally, a little reminder that the National Minimum Wage (NMW) is increasing from October 1st, and the bandings are changing, so that all workers aged 21 and over are entitled to the new NMW. Currently, the top band is available to all workers aged 22 and over; 21 year olds remain in their current band until October.

Useful links

http://www.hmrc.gov.uk/paye/forms-publications/register.htm - Register to receive an email letting you know when the HMRC Employer Bulletin is available for download (as they are stopping the paper version from September 2010).

http://www.hmrc.gov.uk/payinghmrc - Check you have the correct payment details for HMRC, as the old bank accounts will be closing during this year.

http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/DG_4017919 - Calculate the State Pension age for your employees with this tool from HMRC.

What would you like to see covered next time? Let me know in the comments! You should follow me on twitter here.

In Year Filing & the Budget – What you need to know

Last time, end of year fining, ahem, filing was the topic of conversation http://bit.ly/9PwX4e. For our adventures in payroll this time, I’ll walk you through in-year filing. Before we start, here’s a little recap of the impact of today’s Budget on your payroll:

For April 2010 to March 2011

• Personal Allowances remain fixed at the 2009-10 values.
• Introduction of 50% tax rate for income above £150,000.
• Sliding scale reduction of personal allowances for incomes over £100,000.

NIC Changes

• Lower Earnings Limit raised to £97 per week (from £95 per week).
• No changes to NIC rates for employers or employees for 2010-11.

There are increases in National Insurance Contributions on the horizon, but these won’t kick in until April 2011.

So, with that out of the way, back to in-year online filing. HMRC introduced this new measure in April 2009, for companies with more than 50 employees. Four forms are covered, the employee starting and leaving forms (P46 and P45) and two new forms: P46(Pen) and P46(Expat). If you have fewer than 50 employees, it doesn’t become compulsory to file these forms online until April 2011; but with most modern payroll software, it is easy enough to get started early.

Which form should I use?

Form & when to use
P45 Part 1
When an employee leaves your business

P45 Part 3

When a new employee starts

P46

When a new employee starts without a P45 from their previous employer

P46(Pen)

For sending details of a new pension or annuity that you start to pay

P46(Expat)

For certain employees seconded to work in the UK (see here for details)

All of these forms can (and should) be filed online.

If you have registered online for PAYE online filing (using the handy link in my last article), you are now ready to go. ( If you haven’t, you can find instructions on registering at the following link: www.hmrc.gov.uk/paye/file-or-pay/fileonline/register.htm.)

There are four main ways to file the forms:

1. Use commercial payroll software – usually the information on the forms can be completed for you, using the employee information.
2. Use the HMRC ‘Online Return and Forms – PAYE’ service – this won’t help you actually pay your staff, only complete the forms.
3. Pay an agent or payroll bureau to file on your behalf, as part of running your payroll.
4. Sign up to Electronic Data Interchange (EDI) – this is typically only suited to large employers.

Finally, HMRC have published a helpful list of common filing errors and pitfalls to avoid, which you may want to bookmark: www.hmrc.gov.uk/paye/employees/start-leave/common-online-errors.htm

What would you like to see covered next time? Let me know in the comments!

5 Steps to a Stress-Free Payroll Year End

The other day in Keytime towers, Jim was telling me a story about a friend of his, who had managed to rack up £22.50 in library fines. The plucky hero in our story spent some time pleading with the librarian, attempting to wriggle off the hook in any way he could think of, including claiming poverty. Eventually, accepting defeat, he pulled out a couple of bags of 5p pieces he was intending on popping into the bank, and started slowly counting them out. In a moment of clemency, the librarian relented, and told him the fine would be wiped off his record. Her only condition was a 2 month reduction in the number of books he could borrow, and a promise to return them on time.

With payroll year-end just over a month away, it got me thinking about electronic filing of payroll returns; for the last few years, businesses with more than 50 employees have had to file their year-end paperwork online. This year, all businesses with 5 or more employees must file online by May 19th, or face fines (even if you file early on paper). Unlike the kind-hearted librarian in Jim’s story, HMRC are unlikely to relent.

There are a number of different fines and penalties in the HMRC arsenal; here are the main ones that apply to payroll.

• Failing to file online - up to £3000 penalty (applies even if you file by paper on time, and even if you try to correct things by filing again online).


• Filing late - £100 per 50 employees per month/part month that it is outstanding between 20th May and 19th September. Penalty notices are sent out again in January and May if you still haven’t filed.


• You can also be fined for paying late. Penalties can even apply if you pay an estimated amount, and then top up during the year. The best advice is to ensure that you get accurate, timely figures from your payroll service; whether you outsource it, produce it manually, or use commercial software to calculate your payroll.

5 Steps to a Stress Free payroll year-end.

1. If you haven’t already, register to file online with HMRC.

   www.hmrc.gov.uk/paye/file-or-pay/fileonline/register.htm



2. Setup your records for the new tax year.

   It’s best to have these prepared so you are ready to go on April 6th. HMRC “h3ly recommends that you use electronic methods to keep your payroll records.” (http://www.hmrc.gov.uk/paye/payroll/year-end/checklist.htm)

3. Finish off your payroll records for the past tax year.

   This basically means checking that the P11 records for each employee are correct, and using those figures to complete your P35 and P14s. Commercial software will usually do this for you, and give you a report so you can check that everything adds up.

4. Complete & file your Employer Annual Return, and make any payment needed.

   You need to complete one P14 for each employee, plus a single P35 form to summarise the end of year payroll totals for the business. These forms have to be with HMRC by 19 May, but you will need the figures earlier to calculate if you need to make a balancing payment, or if HMRC owe you a refund. If you have to make a balancing payment, funds must reach HMRC by 19th April for postal payments, or by 22nd April for electronic payments.

5. Give each employee a P60.

   You have to give a P60 to each employee who was working for you on the last day of the tax year (5th April). The latest you can give the P60s is 31st May.

In a future post, I’ll go through in-year filing, and how you can get ready before it becomes compulsory.