Tax year-end is one of the busiest phases in a payroll team’s calendar. There are a myriad of additional reports, processes and communications to employees and HMRC that aren’t required during other pay periods.
This essential checklist looks at the core end of tax year submissions, the notifications required to comply with legislation and the communication provided between employees and specialists responsible for payroll. It will also examine the changes which need to be accommodated for in 25-26 and prepare for 26-27 tax years.
If you need support or guidance for any element of payroll year-end, then don’t hesitate to contact MSP Payroll. We can provide support, consultancy or full payroll services depending on your requirements and available resources. Click here to speak to our team.
The core processes required for payroll end of year
The following are the core processes all Payroll teams should cover before tax year end. Many of these are for compliance with HMRC regulations, and reconciling payroll correctly leaves little room for error. The HMRC website has a detailed overview of the actions required, deadlines and its expectations.
Final Full Payment Submission (FPS)
The final full payment submission (FPS) informs HMRC of the payment figures for each employee for the year to date. The deadline for final submission is on or before your employees’ final pay period for the tax year. If any corrections are required to the final FPS, then the following dates apply:
- By 19th April – an additional FPS can be submitted with the corrected year-to-date figures.
- After 19th April – a new FPS should be submitted showing the correct year-to-date figures
- By 5th April – if the wrong payment date has been submitted, then correct with an additional FPS with 0 in the Pay in this period column.
MSP Payroll can help your organisation prepare and submit final submission forms or provide complete outsourced payroll services. Speak to us here.
Final Employer Payment Summary (EPS)
An EPS is required if the final FPS did not have the “yes” box checked to mark it as final, if your payroll software doesn’t have this option to check, you sent your final FPS before the deadline date and then didn’t pay anyone for one month or more OR you did not pay anyone in the final pay period of the tax year. You should also submit an EPS to reclaim statutory payments, such as maternity or paternity, reclaiming construction industry scheme deductions or pay the apprenticeship levy if applicable.
If you haven’t paid any employees then submit an EPS instead of an FPS. If you have paid employees or you’re reclaiming any of the above, then submit a final FPS AND an EPS.
The deadline for an EPS submission is the 19th April. If you require any support on when and how to complete an EPS form, please contact us here.
Issue P60s for all employees
The P60 form is a summary of an employee’s total pay and deductions for tax from the previous year. Each employee must receive a P60 from their organisation by the 31st May at the latest. A P60 can be provided in electronic or paper format.
Corrections can be made to an employee’s P60, but must be accompanied by a letter confirming the change.
Submit P11D and P11D(b) forms for Benefit in Kind
If your organisation provides any of its employees with benefits, such as PMI or company cars, then a P11D form will be required. The P11D reports on the tax obligations for the employee, while the P11D(b) covers National Insurance Contributions for any benefits. If your business has fewer than 500 employees then the payroll team should submit any P11Ds through the HMRC Online Service. For over 500 employees, submission can be made through payroll software.
Speak to our team if you need any further guidance or support with payrolling or declaring BiK submissions.
An organisation can opt to voluntarily pay tax and NI through payroll for benefit in kind. In this instance, the company will not be required to submit a P11D, but it will still require a P11D (b) for NIC to be reported at the end of the tax year.
If an organisation provides any taxable benefits to employees that aren’t currently covered by payroll, then those benefits, and only those benefits, will require a P11D submission.
For more information about payrolling benefit in kind, read our in-depth article here.
Agree PAYE Settlement Agreements for the tax year
A PAYE settlement (PSA) provides payroll teams with the option to make a single annual payment covering tax and NIC on expenses or benefits for employees that are small, irregular or too cumbersome.
A PSA does not need to be run through payroll or payroll software and can be included in an end of year P11D submission. Class 1A NIC should be paid for these at the end of the tax year.
Note, once this has been registered with HMRC, it will need to be reported each tax year afterwards.
A PSA can include:
- Incentive awards that fall outside of exempt status (this does not include trivial benefits, which are not subject to tax or NIC)
- Small expenses such as telephone bills, where a company provides a telephone to an employee
- Staff entertainment
- And any subsistence or travelling expenses which are over the tax-free daily limit
An irregular expense is one which does not happen at a regular interval and can include benefits or costs to employees for relocation, overseas travel or taking a spouse abroad on a company trip. Impractical expenses are those that are difficult to value, such as personal expenses or staff entertainment. A PSA cannot include wages, company cars or employee bonuses.
Update tax codes and payroll software
Employees will have received their tax code for the next financial year. These will need to be reviewed in the payroll software and changed where applicable to ensure that the next pay period (the first in the new tax year) has the correct tax code for the employee. This is a simpler task than those already mentioned, but extremely important to input accurately, as an incorrect tax code or omission may incur tax implications for the employee.
Pension auto-enrolment review
Employees are required to re-enrol in their company pension scheme every three years. Payroll teams should review the pension enrolment dates for their eligible employees, and also reassessing those employees previously deemed ineligible for potential enrolment.
Once this has been completed, employers will be required to update their declaration of compliance with the Pensions Regulator.
Please read our detailed guide on pension auto-enrolment here for more information.
Changes to 2025-2026 Tax Year
For the 2025-2026 tax year, payroll teams will need to be aware of several changes to regulations and new initiatives, which will also require attention at tax year end. MSP Payroll can provide guidance and support for your team. Please click here to find out how.
Expansion of the Employment Allowance
We have a detailed analysis of the expansion of the employment allowance and how it can benefit businesses here, but in short, the Employment Allowance on NICs has increased from £5,000 to £10,500. This means payroll teams need to be aware of the increased threshold, the eligibility of organisations and how to claim the Allowance.
Statutory Neonatal Care Pay (SNCP)
In April 2025, employees gained the right to take up to 12 weeks of paid statutory neonatal care leave and pay. This is for babies requiring hospital care and is a day one right for leave, and available to employees after 26 weeks of service for pay.
As with SMP and SPP, payroll teams will be required to calculate eligibility for employees and ensure any statutory payments made are filed in the year end EPS. Read our full guide on SMP and SPP here.
Employers operating in a Freeport Zone
Freeport Zones benefit from significant tax breaks for business rates, duty relief and also employee tax and NICs. Payroll teams who cover multi-site or a broad geographical area should review where their employees are employed and ascertain whether National Insurance contributions are eligible for Freeport Zone relief. From April 2025, payroll teams must include an employee’s postcode in the FPS to ensure that Freeport Zone relief is being claimed accurately.
Preparing for the 26/27 tax year
Once payroll teams have completed their 2025-2026 tax year processes and filed the correct submissions, it is time to ensure they are ready for the 2026-2027 tax year. Initial proposals to payrolling benefit in kind have changed, and statutory pay levels will also require updating and review.
Changes to Statutory Pay Levels
2026 will see a raft of changes to statutory pay come into effect. This includes Stautory Sick Pay from day one for employees, combined with the abolishment of the Lower Earnings Limit to qualify for SSP. Statutory Parenting Pay will increase alongside the National Living and National Minimum Wage, and student loan thresholds will rise as well.
Payroll teams should familiarise themselves with the changes as part of their year end process and then review their employee data to ensure payroll software is correctly updated. For assistance and guidance on 2026-27 changes in statutory pay, speak to our team here.
Payrolling of Benefit in Kind
Payrolling benefit in kind will become mandatory from April 2027. This has been pushed back from the original deadline of April 2026, but organisations can voluntarily payroll BiK before the full transition. Read our article on payrolling BiK and the ramifications for payroll here.
How can MSP Payroll help?
Our experts can provide comprehensive support across a range of Payroll consultancy and support, including:
- Ongoing payroll solutions either fully outsourced to our team or supplemental support for your in-house payroll expertise.
- We can help you structure and execute your year end tasks and payroll processes.
- We can provide ad-hoc payroll services on demand when you need them most. This could include support and advice on changes for 2026, or final FPS or EPS
- We are specialists for all payroll regulations and provisions, including SSP, SMP, pensions, seasonal payments, PAYE and National Insurance Contributions.
- We can provide payroll software to help process the end of the tax year.
Contact us here if you would like to discuss implementing payroll support.
Payroll end of year: Frequently asked questions
How should payroll process an employee who spent the tax year on unpaid leave but did not leave the business?
An employee on unpaid leave for the full tax year, but still on payroll, should be included in your RTI submissions. The FPS should be submitted showing zero earnings, and the employee should also receive a P60 reflecting their unpaid leave.
Do we still need to submit a P11D(b) if we voluntarily payrolled BiK?
For the tax year ending March 2026, a P11D(b) will still be required even if BiK has been included in the regular payroll period. There are also exceptions for payrolled BiK (see our article here), which may mean your organisation should also submit a P11D, too. This is scheduled to change in 2027, and in the meantime, if you have any questions, our team will be happy to help.
How long after year-end must payroll records be retained?
HMRC mandates that payroll records be kept for a minimum of three years after the tax year they apply to. Most organisations keep records for a minimum of six years to cover any claims that may be brought within the Limitation Act period of time. Records are defined as: payslips, P60s, payments and deductions, statutory payments and any communication with HMRC. If the record is related to pensions or pension auto-enrolment, then the requirement is to retain the records for six years. HRMC can request a compliance check with short notice, so accurate and structured record keeping is required.