Prepare for Payroll: How to make the 2023 year end as smooth as possible

2022 has been and gone (cue sighs of relief from small businesses across the UK) and what a year it was. UK employees are now dealing with an across-the-board fall in real wages, while employers prepare for a recession that will is hugely likely to affect how they pay their employees and hit bottom lines.

For finance managers, payroll year end often means tedious administration tasks, and a bumpy transition into the new financial year. So how do you ensure a smoother process this time amidst the current economic challenges?

Finding the right payroll tool is our first recommendation. The best small business payroll software can act as expert CIPP-accredited payroll specialists, automating monotonous tasks.

Still, there are lots of other smart ways to alleviate Full Payment Submission (FPS) stress. Below, we speak to Claire Treadwell, Product Director at IRIS, about how savvy business owners can get ahead of the chaos and ready for the 2022/23 payroll year end.

1. Know what’s required

Small businesses should research to understand exactly what submissions they need to make as soon as possible for the upcoming year end. That way, you can start compiling the necessary files in one, easily-accessible location now rather than dealing with it all at the last minute.

Treadwell explains, “not only does this make life easier before the deadline, it prevents any need for an amended Full Payment Submission (FPS) submission.”

This includes understanding if an Employer Payment Summary (EPS), or just an FPS (Full Payment Summary) needs to be sent. EPS’ are used to reclaim:

• Statutory maternity, paternity, adoption, parental bereavement or shared parental payments
• Employment Allowance (increased on 6 April to £5,000)
• Construction Industry Scheme (CIS) deductions as a limited company
• National Insurance contributions holiday (for previous tax years)

So where can you find what information is required?

“HMRC’s website is the best source to understand what is needed for submissions,” Treadwell advises. “Businesses can also use the payrolling benefits and expenses online service, although you’ll need to register before the start of the new tax year.”

Check out HMRC’s Introduction to PAYE for more information on what needs to be included in your payroll year end for 2022/23.

2. Check for legislative changes

Government tax changes and initiatives can dramatically influence your payroll. With the rocket-powered political rollercoaster that was 2022 (the UK had no fewer than three prime ministers and four chancellors in just 12 months) if you don’t keep an eye out for news or updates, last-minute payroll preparations can equal big shocks.

According to Treadwell, “we see many businesses forgetting to read software or legislation changes, prior to year-end processing, which is beneficial to fully understanding what’s needed.”

Only on very rare occasions will new legislation be implemented during a tax year, so now is the best time to take note of any incoming changes for 2023/24 – such as the start of the Basis Period Reform transitional period.

You can also check reputable online resources for SMEs, like the Startups website, to keep on top of all the important announcements.

What legislative changes were announced for the 2022/23 tax year?

One of the most noticeable planned payroll changes for the 2023/24 tax year affected National Insurance. The Health and Social Care levy was to be added to National Insurance contributions for working-age employees, self-employed people, and employers during the current tax year.

However, in November 2022, this policy was reversed. No further changes are expected for 2023-24.

3. Make backups

Data loss is one of the biggest concerns amongst SMEs, as we outline in our guide on how to keep your business safe from cyberattacks.

There are many potential causes – human error; software corruption; cyber hacks. But the repercussions are always the same: a lot of time and money spent fixing errors.

It might seem obvious, but another one of Treadwell’s top tips is to ensure you are consistently saving copies of your payroll information to reduce the chances of losing important details.

“Taking backups of payroll data is often overlooked,” Treadwell explains, “but doing so saves a significant amount of time if data is misplaced.”

This can be done on your payroll software but you should also save your files to an external drive to protect against potential system crashes or PC malfunctions. That way, you can easily reinstate your payroll.

Make sure that your finance team or manager gets into the good habit of backing up all payroll data, especially PAYE slips.

4. Invest in the right payroll software

We know that payroll duties can be among the most labour-intensive, tedious admin tasks involved in running a company.

Payroll software is an application that helps businesses manage, process and pay employees accurately and on time, while complying with all legal requirements.

“Year-end processing can be a stressful time, on top of the challenges that come with running a small business,” Treadwell says.

“Our payroll software helps small businesses handle processes automatically, freeing up time for business owners to concentrate on other critical tasks – like growing their business.”

Finding the brand that’s the best fit for your small business takes time. Here’s a quick breakdown of some of the most popular picks on the market:

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BEST ALL ROUND
Provider IRIS	Provider PayEscape	Provider Moorepay	Provider Advanced Business	Provider MHR	Provider ADP UK	Provider TopSource Worldwide
Best for Small construction businesses	Best for Retail and hospitality businesses	Best for Growing teams upgrading to an advanced payroll tool	Best for Professional service teams with employees paid on commission	Best for Remote teams, like software developers	Best for Small businesses wanting the flexibility to change payroll quickly	Best for Small businesses operating globally
Cost Provides personalised quotes after assessing business needs	Cost Monthly – £53 base price + £3.20 per employee per month Weekly – £15 base price + £1.32 per employee per week	Cost Provides personalised quotes after assessing business needs	Cost Provides personalised quotes after assessing business needs	Cost Provides personalised quotes after assessing business needs	Cost Provides personalised quotes after assessing business needs	Cost Provides personalised quotes after assessing business needs
Fully managed?	Fully managed?	Fully managed?	Fully managed?	Fully managed?	Fully managed?	Fully managed?

Save time and money comparing payroll service prices by using our comparison tool Compare Costs

Our handy price comparison is a good way to get personalised payroll provider quotes for your firm. It’s free, takes just one minute, and involves zero obligations on your part.

Why should I prepare for payroll year end now?

As Treadwell stresses, businesses who submit their final reports late, and without a valid reason, may receive either an online penalty warning from HMRC, or a penalty change.

The chances of you missing the deadline increase dramatically the longer it takes you to begin year-end preparations. To avoid this, Treadwell recommends that you “actively monitor deadlines and prepare well in advance.”

“The most common error we see is little to no preparation,” Treadwell adds. “Many [business owners] are unaware of key deadlines and do not update their software in time.”

Our top tips to prepare for the 2022/23 deadline are:

• Know what’s required on the HMRC website
• Keep an ear out for legislative changes in the upcoming March budget
• Carry out regular data backups
• Invest in small business payroll software

Clearly, if you’re reading this article, you’re already thinking ahead and aware of the importance of financial planning. Now, simply apply the above steps and you will be in an excellent position for next year’s payroll year end.