When it comes to HMRC responsibilities, navigating the complexities proves challenging for employees and employers alike.
If you’re wondering when employees should review their tax codes and notify HMRC or when employers should handle tax notices and RTI transmissions, read on!
Advice for employees – how to avoid tax errors
An individual's tax code reflects the amount of income tax deducted from their earnings whether this is their salary or another income source before they receive payment.
If the tax code is incorrect, it could lead to an overpayment or underpayment of taxes.
So, what are your responsibilities as an employee?
We advise verifying your tax code each tax year. It’s worth noting that not everyone will receive a tax coding notice (e.g., you won’t receive one if your tax code aligns with the standard tax-free personal allowance).
If you do receive notice regarding a tax code alteration, expect to receive it via the HMRC app or in the post.
Employer responsibilities for new starters and contractual changes
As an employer, it's imperative that you inform HMRC when an employee commences or concludes their employment or experiences any modifications to their earnings.
It’s in the best interest of your employees that you communicate with HMRC to ensure accuracy and currency of employees’ tax codes.
Employee responsibilities
An employee should promptly inform HMRC about any changes, which include:
- Income - Notify HMRC if there are changes in your income, including:
- Earnings from new sources, such as income from self-employment or rental income from a property
- Income exceeding your personal allowance
- Income over £85,000 from self-employment
- Earnings from property, money, shares, or dividends from shares
- Taxable benefits - Be sure to report any taxable benefits you receive such as state pensions, carer's allowance, and other similar benefits.
- Job-related benefits - If you receive benefits through your employment like a company car, it's crucial to keep HMRC informed.
- Capital gains - When you receive lump sums from selling assets that are subject to capital gains tax, such as shares, you must report these changes to HMRC.
How and when to send a Full Payment Submission (FPS)
- Completing & sending FPS
Managing Full Payment Submission (FPS) is crucial for employers.
Use your payroll software to send FPS to HMRC, reporting employee payments and deductions.
Enter your PAYE reference and accounts office reference in the software.
HMRC offers detailed guidance for each FPS field, covering employer info, employee details, pay, deductions, and National Insurance.
- When to send
Send the FPS on or before the employees' payday, even for quarterly payments. Use the regular payday, even on special occasions like public holidays.
- After submission
After submitting the FPS, view tax and National Insurance calculations in your HMRC online account from the 12th.
Claim deductions like Statutory Pay by submitting an Employer Payment Summary (EPS) by the 19th of the following month.
Pay the balance owed to HMRC by the 22nd or by the 19th if paying by post.
How do you send an Employer Payment Summary (EPS)?
- Payroll software features
Your payroll software offers a valuable feature - the Employer Payment Summary (EPS). It goes beyond just facilitating data submission and is instrumental in various aspects:
- Reclaiming Statutory Payments - Employers can employ the EPS to claim back statutory payments, including those for maternity, paternity, and other parental benefits.
- Employment Allowance Claim - The EPS facilitates the annual submission of an Employment Allowance claim, a significant financial benefit for employers.
- Apprenticeship Levy Obligations - For entities with an annual bill exceeding £3 million, the EPS serves as the means for fulfilling their apprenticeship levy obligations.
- After submission
Following the successful transmission of your EPS, there are subsequent actions to consider:
- Reviewing claims - You gain the ability to scrutinize your claims and ascertain the balance of your financial obligations through your HMRC online account.
- Payment to HMRC - Ensure that your payment to HMRC is settled by the 22nd of the following month. If you prefer traditional postal methods, adhere to the 19th as the deadline.
An important reminder – months of no payment
It's crucial to note that even in months where no payments are made to employees, you must still submit an EPS by the 19th of the following month.
This is commonly referred to as a 'nil submission,' designed to prevent HMRC from making assumptions about your financial status and issuing late payment notices.
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