Pauline’s Payroll Problems – End of Tax Year 

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In this latest episode of Pauline's Payroll Problems, we look at some lesser-known end of tax year pain points and explain why moving to PayFit has helped Pauline manage this difficult period in the year. 

Pauline's end of tax year pain points 

Tax code uplifts

Tax code uplifts occur each year and are directly linked to the new thresholds and rates announced within the Budget. 

Generally, anyone on either an L, M or N tax code has to have their tax code changed, as does anyone with a month 1 tax code. Furthermore, any tax rates, e.g. the higher tax rate threshold, which is changing for the 2021/22 tax year, must also be adapted. These changes, issued through P9 notices from HMRC, all need to be processed before running the new tax year's first payroll in April.

How did PayFit help Pauline? 

Historically, this process has been a manual one for Pauline. With her company, Hooli, employing over 100 employees, she would often have to spend a considerable amount of time going through each employee's details to ensure that everything was up to date and correct. 

Although this was a tiresome and manual task, she was aware of the implications of missing any changes and how it could seriously impact an employee's pay. 

Since the switch to PayFit, Pauline has benefitted in two different ways: 

  • through the processing of all P9 tax code changes directly from her employer's HMRC account automatically in the PayFit app; 
  • and by automatically uplifting any employee tax codes.

Statutory rate changes

Each year, any increases to statutory pay rates, e.g. Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Sick Pay (SSP), need to be amended to ensure employees receive the correct rates for the right period. 

The rate changes always take effect from the Sunday on or before April 6th, meaning employers need to uplift the statutory rate and work out when to apply it. When the rate should be applied is likely to vary for each employee. 

How did PayFit help Pauline? 

Changes in statutory rates have been difficult in the past for Pauline. Before moving to PayFit, she had to manually uplift these rates herself. This manual input meant that her payroll was left open to data entry errors.

However, thanks to PayFit's cloud-based solution, all changes are made by PayFit and then automatically adopted within the app without the need to perform a software update. 

National Minimum Wage 

Each year the Budget brings about many changes, and none are more important than those relating to the National Minimum Wage (NMW). 

Although NMW rates get implemented from the beginning of April, employees affected by the change will see an increase in their pay from the first date of their next pay reference period. This period must be no longer than one month.

How did PayFit help Pauline?

Pauline has long been aware of the consequences of not implementing changes to NMW. Although none of the companies she has ever worked for has been affected by this, HMRC's capacity to issue fines and, perhaps most importantly, add employers to a "name and shame" list has always meant she's kept a close eye on any changes. 

Before moving to PayFit, amendments to NMW meant that Pauline had to alter employee wages manually. 

However, now Pauline no longer has to worry about non-compliance with NMW legislation. Any employees who are not in receipt of the NMW are flagged immediately. If any employees in receipt of the NMW have their rates reduced below the threshold due to salary sacrifice, Pauline is also alerted to the error. 

Student Loan Plan 4

A Budget announcement will see many amendments to current legislation; however, it can also bring about entirely new legislation that needs to be understood and implemented—e.g. Student Loan Plan 4 for Scottish employees.

How will PayFit help Pauline? 

This year, the introduction of the Student Loan Plan 4 will see some of Hooli's employees impacted.

If Pauline were choosing to run payroll by herself, she would need to understand who is affected, how to implement deductions and what she needs to do to prepare for the changes.

But, since Pauline uses PayFit to run her payroll, she needn't worry about implementing new payroll legislation. Everything is added to the app in advance, meaning that Pauline does not need to calculate student loan reductions manually. 

Did you know?

PayFit also offers automated Student Loan Notifications from HMRC meaning that any changes occur automatically. 

Can you relate to Pauline's Payroll Problems?

If you too are struggling with your end of tax year tasks and don't know what to do, then why not book a demo with one of our product experts today? We're always happy to speak with you and explain how PayFit can simplify your payroll and HR processes.

Other articles featuring Pauline...

Meet Pauline – Hooli's payroll & HR manager

Meet Pauline, Hooli’s payroll & HR manager. Over the next few months, we will be chronicling her journey and explaining how PayFit has supported her with her payroll problems.

Pauline's Payroll Problems – Payroll Journals

PayFit simplifies payroll and finance processes by allowing admins to download payroll journals and then seamlessly upload them to various accounting software.

Pauline’s Payroll Problems – P11Ds & Payrolling Benefits

Processing benefits is not a task that many look forward to. Unfortunately, Pauline had to find out the hard way. Discover how things have improved since she switched to PayFit.

Pauline's Payroll Problems – Finalising Payroll

Discover how PayFit's innovative payroll management software managed to simplify Pauline's monthly payroll run for her 100+ employees.

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