Correcting payroll errors - current year

You must make sure the payroll figures and details about your employees that you report to HM Revenue & Customs (HMRC) using Full Payment Submissions (FPS) are accurate. Sometimes though, mistakes will happen - and if they do, it's very important that you correct them.

This guide shows you what you need to do if you find out you have made a mistake with employees' personal details and how to handle errors you may have made when calculating, reporting and deducting PAYE tax, National Insurance contributions (NICs) and student loans from employees.

On this page:

Top

Collecting an underpayment from or refunding NICs to your employee - current tax year

If you have deducted too much NICs from your employee, simply refund the extra amount on their next payday.

If your employee paid too little NICs you must pay the underpaid NICs to HMRC as soon as you know you have paid too little.

Sometimes you can recover the amounts the employee has underpaid if you have made an error in good faith, but there are strict rules about when you can do this. You must contact HMRC's Employer Helpline before you recover any from your employee.

If you are able to recover from your employee you need to make sure that both the following apply:

  • the extra deduction you make is no greater than the employee's NICs due on each payday
  • you only make extra deductions in the remainder of the tax year in which the error was discovered or the following tax year

There's more information later in this guide about how to report this on your payroll.

Find contact details for HMRC's Employer Helpline

Top

Top

Missing Full Payment Submission (FPS)

You must submit an FPS each time you make a payment to an employee.

For the 2013-14 tax year, if you make a payment to an employee but don’t submit an FPS you must include the missing payment information, including updated year to date figures, in your next FPS. Don't forget to include any leavers.

For the tax year 2014-15 onwards, new late filing penalties will apply to returns due from employers where payment information is not received as expected on an FPS. If you don't file an FPS on time and don't tell HMRC what you think you owe, they may raise an estimated charge that you should pay. If you don't pay that specified amount in full, you may get further interest and penalty charges. You can find out more about late filing penalties and specified charges in the guide 'What happens if you don’t report payroll information on time'.

What happens if you don't report payroll information on time

Top

Top

National Insurance category letters - correcting errors

You can enter up to four National Insurance category letters for one employee on an FPS. In most cases, the category letter you use at the start of the year will be the same for the whole year.

If you discover that the wrong National Insurance category letter was used for an employee on an FPS you have submitted, you should on your next FPS:

  • make an entry in all the National Insurance data fields, even if it is zero, for the incorrect category letter
  • enter the correct category letter and show for that letter the correct year to date National Insurance data
  • continue to report the entries made in the incorrect category letter for subsequent FPS for the remainder of the tax year. You do not need to continue to report a category and zeros if the category should never have been used

If you have repaid or recovered NICs from your employee because of an incorrect category letter you can record the amount in the 'employee’s NICs this payment' data field for the incorrect category letter.

If you do not or are unable to recover all of the NICs underpaid from the first FPS made after you discover the error and instead recover any from subsequent FPS you should continue to show the amount recovered from the earnings shown on the FPS, as above. 

Correcting National Insurance category letters - example

An FPS was submitted for months one to six which showed the National Insurance category letter A.

Year to date NICs data in month six shows

Amount

Earnings at the LEL to date

£2,784

Earnings at the LEL to the PT to date

£1,020

Earnings from the PT to the UAP to date

£2,400

Earnings from the UAP to the Upper Earnings Limit (UEL) to date

£0

Pay subject to Class 1 NICs this payment

£1,034

Employer's NICs to date

£339

Employees' NICs to date

£288

The National Insurance category letter should have been C. When you send your FPS for month seven which will include the NICs due on any earnings paid in that month, it should show:

Category

A

Earnings at the LEL to date

£0

Earnings at the LEL to the PT to date

£0

Earnings from the PT to the UAP to date

£0

Earnings from the UAP to the UEL to date

£0

Employer's NICs to date

£0

Employees' NICs to date

£0

Pay subject to Class 1 NICs this payment

£0

Employer's NICs this payment

£0

Employees' NICs this payment

-£288 (overpayment of employee's NICs to be repaid may be recorded here)

Category

C

Earnings at the LEL to date

£3,248

Earnings at the LEL to the PT to date

£1,190

Earnings from the PT to the UAP to date

£2,800

Earnings from the UAP to the upper earnings limit to date

£0

Pay subject to Class 1 NICs this payment

£1,034

Employer's NICs to date

£396

Employees' NICs to date

£0

Employer's NICs this payment

£57

Employees' NICs this payment

£0

Top

Top

Reporting errors on an Employer Payment Summary (EPS) - current tax year

If you have made a mistake on an EPS in the current tax year, you should submit another EPS to show the correct total year to date figures.

You must always show correct total year to date figures on the EPS - do not show the difference between what was originally submitted and what the figure should be. Your first EPS after you started sending PAYE information in real time should have included any recovered payments within the same tax year, even if they were recovered before you started to send PAYE information in real time.

If you need to correct an error in a previous tax year, you can find out how to do so by following the link below.

Correcting payroll errors - previous year

Maternity, paternity, adoption, sickness

Regional employer NICs holiday

Top

Top