Payroll professionals will be pleased to know there are no big suprises when it comes to this year’s payroll year end, but there are several legislative developments from April they need to plan ahead for.
With the end of the 2021/22 income tax year fast approaching – on 5 April 2022 – payroll professionals should ensure their systems are up to date, that employee records are accurate, and that any information they need from colleagues in HR or elsewhere in the business is requested in good time.
“We’ve seen a lot of change over the past couple of years, but you’ll be pleased to know that when it comes to payroll year end there’s no difference to the process itself,” says Joanne Pringle, product manager for Sage Payroll.
“However, throughout the year you need to be looking out for any legislative changes and think about how they will affect your organisation. For instance, from April we will see the uplift in National Insurance contributions and new concessions for veterans and freeports.”
From 6 April, National Insurance contributions (NICs) will increase by 1.25 percentage points for most employees, to help fund health and social care. From 6 April 2023, this will become a separate health and social care levy and will be shown on a different line on employees’ payslips, but for the 2022/23 payroll year it will form part of NICs.
“In the December Employer Bulletin HMRC has provided some guidance on how employers can explain the uplift to employees,” says Pringle. “The guidance provides some default text you can add to payslips explaining the change – ‘1.25% uplift in NICs funds NHS, health & social care’.” As we approach 6 April 2022, you may wish to take the opportunity to discuss the impact of this with your employees and internally within your business. Communication is key to being prepared.
“Most payroll software will allow you to add a message to your payslips, but if you can’t do that, think about how your business will get that message across to staff.”
Since 6 April 2021, organisations that employ qualifying military veterans have been eligible for NICs relief. Employers need to continue to pay the associated NICs during the 2021/22 tax year and then retrospectively claim back any relief at the end of the year, but from April 2022 this relief can be applied via real time information (RTI) submissions to HMRC.
Throughout the year you need to be looking out for any legislative changes and think about how they will affect your organisation.” – Joanne Pringle, Sage
Organisations with qualifying employees at freeport sites will also see a reduction to their employer NICs from 6 April 2022. Employers must self-assess eligibility using HMRC guidance, and should check gov.uk for the eligibility criteria.
Also, construction firms will see some changes to the Construction Industry Scheme (CIS). From the 2022/23 tax year, any CIS deductions recorded as part of an employer payment summary will require a valid corporation tax reference to be present in their submission.
Finally, many organisations are likely to be affected by the uplift in the national minimum wage and national living wage rates from 1 April, and Pringle recommends checking what impact these might have on business costs.
“For some organisations with lots of staff within a certain age bracket it will have a huge impact, but not for others. Businesses need to be aware of the impact this will have on forecasted wage costs for the 2022/23 year,” she says.
With the Chancellor’s Spring Statement scheduled to take place on 23 March, organisations should listen out for further announcements that could affect their payroll and tax liabilities. Pringle notes that there is unlikely to be an announcement in the Budget that will immediately affect employers’ payroll year end preparations, but they should check whether there are any changes that could affect their first pay runs.
She says: “Software is updated when legislation is announced, so payroll professionals would not have to make any changes.”
Pringle shares some top tips for running payroll year end in 2021/22:
- “Check if you have a week 53. This doesn’t affect monthly payrolls, but if you have a weekly, fortnightly or four-weekly payroll – and your payday falls on Tuesday 5 April – then you need to check whether you have a pay run after week 52.
- “Make sure all your leavers are updated correctly – you want to make sure you only issue your P60s to people who are still employed. P60s need to be received by employees by 31 May.
- “If you haven’t already, make sure you have your log-in credentials that you need for HMRC or payment providers’ systems. It’s a busy time of year and you don’t ideally want to have to ring third parties to get those credentials.
- “Get ahead – you need to communicate and work collaboratively with your colleagues, employees and stakeholders. Give them any advance warning to get all of the information you require.
- “Don’t be afraid to reach out if you need help or have gaps in your understanding. Many payroll operatives feel under pressure because they often have other tasks to do, and quite often they will feel a lot of responsibility because all employees want to be paid correctly and on-time. They should seek any help that they need – there’s lots of resources available including those from HMRC, the Pensions Regulator, or digital resources from the Sage advice blog.”
To find out how you can boss payroll year end, visit the Sage website.