Preparing for Year-End Payroll: A Comprehensive Guide

The HMRC submission deadline for the 2024/2025 tax year is fast approaching on 19 April 2025, and with it comes the usual rush. Plus, don’t forget you’ve got to get your team’s new P60s to them by 31 May 2025.

Let’s face it – year-end payroll can be a little overwhelming. However, getting it right is crucial for staying compliant with HMRC and ensuring your team receives their P60s and correct pay. A small mistake could lead to penalties, delays, or frustrated employees. Taking time to double-check everything now means you'll start the new tax year on the right foot, stress-free!

To make things easier, here’s a step-by-step guide to help you navigate the process.

1. Review Employee Data

The first step is to ensure that all employee details are accurate and up-to-date, including tax codes, pay rates, and any changes in personal information. Be sure to correct any discrepancies before running the final payroll. Also, check that any new starters or leavers have been processed, and communicate with managers to ensure no one is missed.

Avoiding errors that require retrospective adjustments is crucial, as corrections after 19 April require submitting additional Full Payment Submissions (FPSs) or  Employer Payment Summaries (EPSs). Previously, these adjustments were made through an Earlier Year Update (EYU), but that process is no longer in use. Retrospective adjustments are still possible but involve extra administrative steps, which payroll teams prefer to avoid. The goal is always to prevent these adjustments after the tax year ends.

2. Final Pay Run Reconciliation

Before running your final payroll, double-check that all regular and one-time payments—such as bonuses, overtime, commissions, and unpaid leave—are correctly included. Ensure deductions like pension contributions, student loan repayments, and other withholdings are accurate. Statutory payments, including Statutory Sick Pay (SSP) and Statutory Maternity Pay (SMP), should be processed correctly. If any overpayments or underpayments have occurred, now is the time to correct them to ensure payroll accuracy before closing out the tax year.

In some cases, your payroll might not end on week 52, which means you may need to process an additional payroll, potentially ending on week 53, 54, or 56. This typically applies if you process weekly, two-weekly, or four-weekly payrolls, and the payroll date falls on 5 April (or 4 April during a leap year). Payrolls that run monthly are unaffected by this issue. If this happens, it's crucial to switch employees to a week one tax code to avoid over-taxing, which most payroll software handles automatically. However, it’s always wise to double-check.

Here’s how the payroll falls if it occurs on 5 April, depending on your payroll frequency:

• Weekly payroll: Week 53 (5 April to 11 April)
• Two-weekly payroll: Week 54 (5 April to 18 April)
• Four-weekly payroll: Week 56 (5 April to 2 May)

Remember, if you’re processing one of these affected payrolls, ensure the tax code is updated to a week one status. Once the new payroll year begins, make sure to adjust the tax code again according to the P9X for the new year. This adjustment is key to ensuring accuracy and avoiding unnecessary tax payments.

Ensure your final Pay As You Earn (PAYE) submission to HMRC is accurate and complete. The deadline for submission is April 19. This report should reflect the final tax deductions, National Insurance contributions, and any adjustments for the year.

Before running your year-end process, ensure the final pay run for the 2024/25 tax year is completed, including checking for week 53 (or 54/56), processing the payroll, and handling leavers. Submit your final FPS and, if needed, EPS by 19 April. Remember that the final EPS submission differs from regular monthly or quarterly ones—it will include your end-of-year declarations. Once done, you can proceed with your year-end process and produce your P60s.

3. Generate and Distribute P60s

By 31 May, all employees still on your payroll as of 5 April— including deemed employees under the Intermediaries Legislation (IR35)—must receive a P60. This important document summarises their pay and deductions for the year and is one of the final steps in the year-end process. Using payroll software, you can generate and securely distribute P60s online, just like payslips, or print them if needed. However, ensure that final payslips are issued, and any errors are resolved before generating P60s. If you’re exempt from submitting payroll online, you’ll need to order your P60s from HMRC. If a change is required to a P60, issue a replacement marked as ‘replacement,’ either in electronic or paper format.

4. Reporting Expenses & P11Ds

Employers must report any benefits or expenses provided to employees using the P11D form at the end of each tax year. However, expenses already taxed through payroll are not included. The P11D must be submitted electronically online through PAYE or commercial payroll software by 6 July each year, covering the previous tax year.

P11Ds cover taxable benefits like company cars, medical insurance, and accommodation. However, trivial benefits (worth £50 or less and meeting certain conditions) do not need to be reported. If they’re part of a salary sacrifice arrangement, though, they must be included.

After submitting a P11D, you’ll need to pay Class 1A NICs by 19 July. Going forward, benefits will be payrolled and no longer require a P11D after the 2025/2026 tax year.

5. Update Payroll Software for the New Year

Now that year-end is wrapped up, it’s time to get everything set up for the new tax year. Before running your first payroll, ensure your system is updated with the latest tax codes, National Insurance rates, and any changes to tax bands.

The P9X document from HMRC outlines which tax codes need updating or carrying forward from 6 April, so be sure to check it. Also, review pension contribution thresholds, student loan rates, and any manual updates needed—like deferred National Insurance certificates or childcare voucher assessments—to keep payroll running smoothly. Always verify details with HMRC to ensure compliance.

6. Communicate with Employees

Keeping your employees in the loop about year-end is key to avoiding confusion. Let them know when to expect their P60s, especially since they’ll need them for tax purposes. It’s also a good time to highlight any changes to pay, benefits, or deductions in the new tax year. And don’t forget to remind them when the first payroll of the new year will be processed—this helps set expectations and avoids a flood of questions later. A quick email or a payroll update in their portal can do the trick!

Stay Confident: Assurance Through Each Step of the Year-End Process

By following these detailed steps, you can confidently close out the year and start the new one on the right foot. Staying proactive helps avoid common mistakes and ensures compliance with the latest payroll regulations. You’ve got this—taking the time now to double-check everything means smooth sailing for the months ahead!

Future Outlook

Managing payroll, especially at year-end, can be overwhelming, but expert assistance can make all the difference. At Tugela People, we specialise in simplifying payroll processes and ensuring compliance. Our managed payroll services cover everything, from year-end tasks to ongoing payroll management, giving your team more time to focus on core business activities.

Whether you need help with year-end processing or a long-term payroll solution, we’re here to help. Reach out today and discover how we can streamline your payroll.