Business tax – guidance

Aligning payroll to the correct tax period

You need to realign the payment date of your FPS with the tax month or week if you reported it incorrectly or changed payday.

When you send an Full Payment Submission (FPS) to HM Revenue and Customs, you need to include the date you paid your employees.

You’ll have to realign the payment date of your FPS with the tax month or week if:

  • you’ve changed the day you pay your employees
  • you sent an FPS where you used the date you ran payroll (instead of the date you paid your employees) and this date related to a different tax month

Example

You ran your payroll on 4 October before paying your employees on 7 October. On your FPS you used a payment date of 4 October, so the report is allocated incorrectly to the previous tax month (which ended on the 5th).

How you realign your payroll depends on whether you’ll next pay your employees in the same tax period as your previous FPS (the one with the incorrect or out-of-date payment date).

Your next FPS is due in the same tax period

Send another FPS, on or before your employees’ payday, with the correct payment date. Treat this figure as an extra payment for that tax period.

This may mean your employee pays more tax in this period.

Your next FPS is due in the following tax period

Send an FPS (with the correct payment date) on or before your employees’ next payday as normal, giving year-to-date figures.

Your next FPS is due in a later tax period

When realigning payroll, you may not need to report your employees’ pay for a tax month or week if their next payday isn’t until later.

Example

You ran your payroll on 1 June before paying your employees on 7 June. On your FPS you incorrectly used a payment date of 1 June. Your employee’s next payday is 7 July, so you don’t need to send an FPS for the tax month that runs from 6 June to 5 July.

If you need to ‘skip’ a tax month or week in this way, you’ll need to send an FPS to correct your employees’ National Insurance.

Correcting your employees’ National Insurance

Correct your employees’ National Insurance by sending an additional FPS - at the same time or after you realign your payroll.

Fill in your FPS using the values in the following table, keeping all of the other ‘Year to date’ entries the same from the last FPS (or, if it’s the first of the tax year, report only from the most recent tax period).

Field What to fill in
National Insurance category letter Use the same National Insurance category letter as you reported on your last FPS. If you used more than one, send another FPS for the category letters you didn’t use, showing the same year-to-date figures
Gross earnings for NICs in this period Put ‘0.00’
Earnings at the Lower Earnings Limit (LEL) year to date If you pay your employee £112 a week (£486 a month) or more, add their total pay since 6 April to: £112 (if you pay them weekly), £224 (if you pay them fortnightly) or £486 (if you pay them monthly)
Employee contributions payable in this period Put ‘0.00’
Total of employee’s contributions payable year to date Put the same figure as on your last FSP
Employer’s contributions payable in this pay period Put ‘0.00’
Total of employer’s contributions payable year to date Put the same figure as on your last FPS

You’ll need to send an Employer Payment Summary for the skipped pay period if you don’t send any FPS reports.

If your payroll software can’t send corrections

Some software can only send corrections like this at the end of the tax year, in an Earlier Year Update (EYU) report. In the ‘Earnings at the LEL year to date’ field, put the amount for one pay period only.

If your software can’t send EYU reports, you can use Basic PAYE Tools.

Other things you might need to do

As well as affecting their National Insurance, your employee might pay too much tax and need to apply for a refund. Their P60 might also not match their salary - if they ask, you can tell them why and give them a letter confirming how much you’ve paid them.