Correcting payroll mistakes for an earlier tax year
From April 2019, HMRC changed the way in which employers can correct payroll mistakes for an earlier tax year.
If you reported the wrong pay or deductions in the 2020 to 2021 tax year or any later tax years, you can correct this by submitting another Full Payment Submission (FPS) with the correct year to date figures.
If you reported the wrong pay or deductions in the 2019 to 2020 tax year, you can correct this by submitting an Earlier Year Update (EYU) or an FPS with the correct year to date figures if your software allows.
If you reported the wrong pay or deductions in the 2017 to 2018 or 2018 to 2019 tax years, you can correct this by submitting an EYU showing the difference between what you originally reported and the correct figure. You can only use an EYU for tax years when you were reporting online in real time.
Correct an employee’s National Insurance deductions
If you have used the wrong category letter in the 2020 to 2021 tax year or a later tax year, submit an additional FPS with the correct category letter and correct year to date National Insurance for this category letter.
If you need to correct a mistake in the 2019 to 2020 tax year, you may be able to submit an FPS instead of an EYU. You should use your payroll software to check.
If the mistake was in the 2017 to 2018 or 2018 to 2019 tax years, submit an EYU with negative amounts in all the National Insurance year to date fields in the incorrect category letter to reduce the employee’s National Insurance to zero. You should then enter the correct year to date National Insurance amounts under the correct category letter to reinstate the employee’s correct National Insurance contributions.
If the mistake caused an overpayment or underpayment
You must correct your employee’s National Insurance deductions if they paid too little or too much because they were on the wrong category letter.
You will also need to write to HMRC if both the following apply:
the difference is negative because you deducted or reported too much National Insurance
you still owe your employee a refund, for example because they have left your employment
In the letter you will need to include:
the reference ‘Overpaid NI contributions’
your employee’s name, date of birth and National Insurance number
why you overpaid National Insurance contributions
which tax years you overpaid in
how much National Insurance you overpaid
why you are unable to make the payment to the employee
For a claim for one employee, send the letter to:
HM Revenue and Customs
National Insurance Contributions and Employer Office
If you need further information & help do not hesitate to contact us at Amin & Co Accountants at email:firstname.lastname@example.org or call at 0161 224 3510