The End of Financial Year
The end of financial year (EOFY) is fast approaching, meaning that for many businesses it’s time to make sure their ducks are in a row. End of financial year, and Payroll Year End are two of the busiest times of the year for business owners, with compliance requirements, additional admin tasks and preparation for the coming tax year. And this is all on top of business as usual activities. It’s exhausting.
The reality is, it’s not just exhausting, it’s essential to ensure that employees are paid correctly, and your business is compliant with UK law. So the end of the financial year and Payroll Year End – what are the differences between them? And what does each of these yearly occurrences mean for businesses?
Don’t worry, we’ve got your back. We’ll break down everything you need to know about the end of the financial year and Payroll Year End.
What is the end of financial year?
End of financial year
The end of financial year is sometimes known as the end of fiscal year or tax year – confusing, right? Regardless of what it’s called, it refers to the 12-month period that companies use to keep track of their accounting activities. It covers organisations and individuals and looks at tax, turnover, profits and losses.
Keep in mind that the standard financial year, 6th April to 5th April, applies to the government and individuals. However, this is different for companies. For companies, the financial year usually lines up with their accounting year. It’s important to remember that they can also choose their own financial year dates, with the exception being the first year of trading.
Payroll Year End
Payroll Year End, on the other hand, is when organisations need to submit specific information to HMRC. It is sometimes confused with fiscal year because it tends to align with the tax year.
Payroll Year End is when businesses complete the process of reconciling their payroll records for the tax year. It involves calculating the total earnings, tax, National Insurance contributions, and other deductions for each employee.
To complete Payroll Year End activities, business owners are required to submit information to the HMRC after their last pay run, but before the 19th of April. Information business owners need to submit includes:
- Full Payment Submission (FPS)
- Employer Payment Summary (EPS)
- Final submission of the year
- Distribute P60 summary to active employees at Tax Year End.
What is the difference between end of financial year and Payroll Year End
Although the end of financial year and Payroll Year End often happen around the same time, and are closely related to taxes and reporting, there are some clear differences:
- EOFY is broader, encompassing both personal and business finances for tax purposes, while Payroll Year End specifically deals with employee earnings and payroll tax reporting.
- EOFY involves the overall tax calculation and tax return filing for individuals and businesses. Payroll Year End focuses on payroll-specific obligations, such as issuing P60s and submitting final payroll data to HMRC for the Tax Year.
Getting prepared for the end of financial year
As a business owner who is responsible for overseeing many aspects of daily functions, it can be tricky to prepare for EOFY. But our expert advice is to plan ahead, here are our top tips for getting prepared:
Be aware of key dates
Being organised is an impossible task if you aren’t clear on your obligations, or the dates they need to be completed by. So we’ve broken down the most important dates to keep in mind as the financial year comes to a close.
- April 5th: The end of the financial year.
- April 6th: The start of the new financial year.
- May 31st: The deadline for issuing P60s to employees.
- October 5th: Deadline for registering for Self-Assessment (if you haven’t already).
- January 31st: Final date for submitting the online Self-Assessment tax return and making your payment to HMRC.
Review records
It’s essential to ensure that your income and expenses are organised, this includes gathering invoices, receipts and bank statements. During this process, also make sure no transactions are missing or forgotten.
Check Allowable Expenses
Regardless of the size of your company, we recommend that you make sure you’ve claimed all possible business-related expenses that reduce your taxable profit. This could include anything from home office costs to business supplies or vehicle expenses.
Prepare for Your Tax Return
Tax return – the words that make any business owner shudder. But we promise, being prepared is the best way of tackling the beast. How you prepare your tax return will depend on the type of organisation you run:
- Self employed: If you are self-employed or need to file a personal tax return (self assessment). To complete this, you will need to gather together information about your income, allowable expenses and pension contributions.
- Limited companies: Limited companies are required to prepare a corporation tax return, making sure all figures are accurate.
Tips for managing Payroll Year End
We understand that with Payroll Year End fast approaching, it’s a busy time of year – especially as a business owner. Unfortunately Payroll Year End activities won’t go away just because you want them to, so our experts say it’s best to face it head on. Here are our top tips for managing Payroll Year End.
Ensure employee information is up to date
Mistakes such as incorrect classifications happen, but if left unresolved, they can become a real headache for both you and your employees. Getting support from experts, alongside regularly checking employee data can help you to avoid these costly mistakes.
Make sure to adhere to compliance law
Compliance is always important for businesses, but especially so as Payroll Year End rolls around. Our experts recommend you ensure you are up to date with all compliance, particularly with the upcoming Employment Law changes to avoid costing your business valuable time, resources and money.
Thoroughly track attendance
Keeping accurate records of employee attendance including annual leave, sick leave and any other forms of leave will impact employees rate of pay so ensuring this is accurate for payroll is key.
Process payroll accurately
Calculating your payroll correctly and taking all necessary factors into account is vital in ensuring confidence in your payroll process from a business and employee perspective.
Deduct the correct taxes
Ensure the correct deductions are taken during the payroll process including taxes, national insurance, student loans and pension contributions.
Report to HMRC
Report your business finances to HMRC accurately and on time.
Maintain accurate records
HMRC can check your records at any time so it’s vital to maintain accuracy of your employee and payroll data. This will also help you to respond to a query quickly.
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