Reporting pay and deductions correctly
Employers must report employee pay and deductions accurately to HMRC. Mistakes can usually be corrected in the next Full Payment Submission (FPS). However, understanding the process is essential to avoid repeated errors and potential penalties.
Using payroll software effectively
To meet HMRC requirements, employers must use payroll software or a payroll service. This software records pay, deductions, and National Insurance contributions. It must be submitted on or before each payday. Employers also need to include other deductions, such as pension contributions and student loan repayments.
Running payroll problems and FPS corrections
All payments are reported to HMRC in real time using an FPS. If you make a mistake, you can usually fix it by updating the year-to-date figures in your next regular FPS. Alternatively, HMRC allows you to submit an additional FPS before the next one is due. This correction must include:
- The difference in ‘this pay period’ figures
- Corrected year-to-date totals
- The same payment date and pay frequency as the original FPS
- ‘H – Correction to earlier submission’ in the ‘Late reporting reason’ field
Running payroll problems with National Insurance and student loans
Correcting National Insurance errors depends on when the mistake occurred. If it happened in the current tax year, you can usually fix it through your next FPS. For earlier tax years, the process may involve contacting HMRC directly. Similarly, student loan repayment errors require different actions depending on the tax year involved.
Avoiding future issues
To prevent running payroll problems, employers should regularly review payroll data and ensure software is up to date. Timely submissions and accurate records help maintain compliance and reduce the risk of costly mistakes.
