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Get prepared for payroll year-end

Posted 3 months ago in Small business by Tori Seward
Posted by Tori Seward

If you’re like me, you’ll be wondering where the time has gone. It feels like just yesterday I was in a Christmas food coma! Turkey with all the trimmings, a mince pie, cheese, leftover turkey, another mince pie, Christmas pudding, more cheese? (oops)…you get the jist!

I’ve just finished packing away what was left of the Christmas festivities when BAM….. it’s March, hello spring! This can only mean one thing to all of us fortunate enough to work in payroll, and I’m afraid it’s not the Easter chocolate.

There’s something else just as exciting that March entails: payroll year-end. Sorry if you now have that slightly sick feeling in your stomach, like that moment you’re faced with the bill after insisting the next round is on you? Yep, we’ve all been there.

Well, let all those worries be gone! I’ve put together a useful guide which will (hopefully) leave you feeling confident that you’ve got this in the bag! I mean, how hard can it be?

Now, before I go any further, you may be thinking that this reading malarkey is just not for you, and that’s ok! We have some great year-end webinars that might float your boat so feel free to check them out. 

So, first things first. Give yourself time. Unless you’re one for doing things in a hurry and working up a sweat, then, free up your calendar, grab a coffee and follow the steps below before processing your final pay run or pay runs for 2017-2018.

Step 1: Review your opening balances

This relates to both the company and your employees. You’ll need to make sure any required opening balances have been entered into Xero to ensure all year to date figures are reported correctly. You will need opening balances if:

A)You transferred over to Xero part way through the tax year

B)You had any new starters part way through the tax year with a P45

Watch this video or read this help page to find out how.

Step 2: Review your payroll settings and reconciliation

Click into your payroll settings to review all the information that impacts your payroll reporting. If anything is incorrect you can update this before processing your final pay run.

To help you with this, click on the following links to check your payroll settings and carry out a year-end reconciliation. Keep this link handy as you’ll also need to refer back to this to reconcile your final pay run for the tax year.

Step 3: Process your final pay run

This is the same process you have been doing throughout the tax year, by clicking into Payroll > Pay Runs. If you don’t have any payments to make for the final period of the tax year, then you can post a NIL pay run.

Be careful with your payment date here. For this to be reported as the final submission of the tax year, your payment date will need to fall in month 12 (March 6 – April 5).

While this final Pay Run is in draft, it’s a good idea to have a look at your employees’ payslips to confirm year-end figures are correct.

Please remember to post your final pay run by April 19. Xero will automatically send an EPS (Employer Payment Summary) by April 19, which will inform HMRC that it’s your final submission of the year – easy peasy!

Step 4: Download your employees’ P60s and P11s

Now that your final submission has been sent, you can download your employees P60s. It is your duty as an employer to provide your employees with these reports by May 31. Please remember the P60 report will only display the total taxable earnings to date, this is something to look out for if the figures on here don’t match the year to date figures on your employees’ payslips. You can generate the P60 and P11 reports by following these instructions.

Step 5: Review your employees’ tax codes for the new year

Our Product team are on the ball and have already made provisions to uplift all employee tax codes ending in L, M, and N for 2018-2019. They will also update any Week1/Month1 indicators to Cumulative. We’ll let you know once this has been done so you can review these changes. All other tax codes will be carried over from last year and will need to be uplifted manually within the employees’ records.

While you’re in the employees’ records, it’s also a good idea to review their NI categories.

Step 6: Review employment allowance and directorship settings for the new tax year

If you were already claiming the Employment Allowance in the previous tax year, then the new annual balance of £3000 will automatically apply for 2018-2019.You can review these settings if you still wish to claim the allowance to ensure this indicator has been selected in the Payroll Settings.  

Now that we are starting a new tax year, you may wish to review/amend the NI Calculation method for your Directors. Find out how to review both of these settings here.

Step 7: Pension contribution uplifts

Tax codes aren’t the only thing that need to be uplifted for this new tax year. You will need to review the pension contributions too. Your pension provider can provide you with these uplifted values. Then, all you’ll need to do is overwrite the existing detail within the Payroll Settings > Workplace Pension tab. You’ll want to review the employee Pay Templates to ensure these new values are displaying here before you process your pay run for the new tax year.

If you’re connected to your pension provider through Xero for automatic submissions, you’ll need to make these changes directly with your provider. You can then Refresh your Scheme details in Xero to pull these changes through.

And that’s it! Don’t forget, if you run into any issues along the way you can reach out to our friendly support team and we’ll be happy to help!

12 comments

Michael Davis
March 10, 2018 at 10.50 am

As a Business Management student with a minor in Accounting, you’ve got some good ideas about how to do the end of the year payroll summaries. Once I’ve completed my bachelor’s, I’ll be sure to remember these tips and apply them accordingly.

Maria Benjamin
March 29, 2018 at 8.49 am

Thanks Michael!

Glad you found this useful!

Maria

Jon
March 13, 2018 at 12.44 am

I notice there’s nothing here about P11Ds. Is that because Xero, inexplicably, doesn’t produce them?

Maria Benjamin
March 29, 2018 at 8.42 am

Hi Jon,

We’re currently working on payrolling P11D benefits in Xero so this will be available for FY 19/20.

Regards,

Maria

TJ Wheeler
March 13, 2018 at 1.02 am

All great – except P11D support is not an available feature with Xero.

Maria Benjamin
March 29, 2018 at 8.48 am

Hi TJ,

Thanks for the feedback! We’re working on supporting P11D in payroll for the next FY. Stay tuned!

Regards,
Maria

M J Barnes
March 24, 2018 at 1.28 am

It’s not a great deal of help sending out comprehensive instructions on year end payroll procedures when, as far as I can see, there is no provision for printing out the current year’s P60s as this doesn’t appear on the report menu or, as far as I can see, anywhere else!
Xero itself is fine but the reporting is shambolic.

Formats of commonly used reports seem to change frequently and without notice, some handily omit lines when being turned into pdf format and, am I alone in thinking that the lack of a proper VAT reconciliation report necessitating hours of work in Excel each quarter if you actually want to check what you’re sending to HMRC, is something of a major omission?

Tori
April 3, 2018 at 7.52 pm

Hi,
We really appreciate your comments!

For the VAT reconciliation report, it would be great if you could raise this with Xero Support (support.xero.com) so that a member of this department can address these concerns for you.
In regards to the P60 reports for this current tax year, these will be available under the Reports tab in an upcoming release. If you need these reports in the meantime, we are able to download them for you. All you’ll have to do is raise a case with us via support.xero.com with your organisation name and detail of your request and we can download these for you.
Regards
Tori

Jennifer
March 28, 2018 at 10.25 pm

And you have not mentioned the change to student loan repayments. I hope this will be taken care of by Xero?

Maria Benjamin
March 29, 2018 at 9.30 am

Hi Jennifer,

Yes, we’ve also adjusted the rates and thresholds for student loan repayments.

Regards,
Maria

F Scott
April 13, 2018 at 10.41 pm

Just to add here that support from Xero is very slow. I normally have to wait 24 hours for an email reply, even though the target is 7 hrs 30 mins. It is extremely hard to get to speak to someone for one-to-one support. I’m pretty disappointed to be honest.

Tori Seward in reply to F Scott
April 16, 2018 at 8.00 pm

Hi Francesca

I’m sorry to hear you’re disappointed. We have been experiencing a higher volume of queries due to payroll year end which I can assure you are being answered as quickly as possible. We do aim to reply to all queries within 24 hours. Please let us know if you have any queries outstanding and we will get these resolved for you.

Kind regards
Tori

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