Avoiding Costly Payroll Year-End Errors: A Guide for Accountancy Firms

30 January 2025

Payroll year-end is never a walk in the park. The 2024 Autumn Budget introduced several key changes, which aren’t going to be easy for accountants to navigate. With updates affecting payroll calculations, tax codes, and compliance, businesses will turn to their accountants for help.

• 1. Missing Payroll Deadlines
• 2. Incorrect Employee Tax Codes
• 3. Inaccurate NI Calculations
• 4. Not Processing Employee Benefits Correctly
• 5. Overlooking Pension Contributions
• 6. Failing to Distribute P60s on Time
• 7. Overlooking Leavers and Starters
• 8. Ignoring Compliance Changes
• How Outsourcing Payroll Can Save the Day
• Final Thoughts

This is where the real opportunity lies for accountancy firms. More demand means more opportunities, greater revenue and strategic growth. But with great responsibility comes great risk. Payroll mistakes can be costly, and no firm wants to be caught out.

So, let’s talk about the most common payroll mistakes UK and, more importantly, how to avoid them.

1. Missing Payroll Deadlines

One of the biggest payroll pitfalls is missing key HMRC deadlines. Late submissions can attract penalties from HMRC and lead to unhappy clients. So, how can you fix it? Set up automated reminders and have a clear internal process to ensure everything is submitted on time.

2. Incorrect Employee Tax Codes

With the Autumn Budget changes, tax codes might need updating. Applying the wrong tax code can result in employees paying too much or too little tax. Always double-check codes with HMRC before processing payroll.

3. Inaccurate NI Calculations

National Insurance (NI) contributions often change, and firms that fail to update their payroll software or manually miscalculate NI could land in trouble. Use HMRC’s online calculators and keep payroll software up to date to avoid miscalculations.

4. Not Processing Employee Benefits Correctly

Benefits like company cars, health insurance, or bonuses need to be reported properly. Missing or misreporting benefits can result in incorrect tax deductions. Ensure P11D forms are completed accurately and on time.

5. Overlooking Pension Contributions

Auto-enrolment pension schemes come with their own set of rules. Forgetting to adjust contributions in line with new thresholds can lead to compliance issues. Review pension settings regularly to ensure compliance with the latest requirements.

6. Failing to Distribute P60s on Time

Employees must receive their P60s by 31st May. A delay here can lead to complaints and a dent in your firm’s reputation. Automate P60 distribution to ensure timely delivery.

7. Overlooking Leavers and Starters

Payroll errors often stem from incorrectly processing employees who have joined or left the company. Make sure P45s are issued properly and new employees are set up with the correct tax details.

8. Ignoring Compliance Changes

Tax laws change. NI thresholds shift. Minimum wage rates increase. Falling behind on compliance updates can result in penalties and angry clients. Subscribe to HMRC updates and attend payroll training sessions to avoid payroll penalties UK and stay ahead.

Must Read: 5 Legal Implications of Payroll Errors Accountants Must Avoid

How Outsourcing Payroll Can Save the Day

With all these moving parts, it’s easy to see why payroll is one of the biggest headaches for accountancy firms. The good news? You don’t have to do it all alone.

Outsourcing payroll can be a game-changer. Here’s why:

• Less Stress, More Focus: Free up your team to focus on high-value advisory services instead of getting lost in payroll admin.
• Accuracy & Compliance: Outsourcing providers stay updated on tax and compliance changes, reducing the risk of errors.
• Cost Savings: Instead of hiring additional staff for payroll processing, outsourcing offers a more cost-effective solution.
• Scalability: Whether you handle payroll for a handful of clients or hundreds, outsourcing can scale with your needs.
• Better Client Service: With an extra set of hands managing payroll, you can spend more time strengthening client relationships.

No more struggling with preparing payroll year-end reports. With payroll services outsourcing, you can rely on experts to help with compliance while your team focuses on high-value tasks.

Final Thoughts

Payroll year-end doesn’t have to be a nightmare. By following payroll year-end best practices like staying on top of compliance, using the right tools, and considering outsourcing for extra support, your firm can navigate the busy season with confidence. Mistakes in payroll can be costly, but with the right strategies in place, they’re entirely avoidable.

Need help managing payroll year-end without the stress? Maybe it’s time to explore outsourcing as a smarter, more efficient solution.

Let’s talk about how we can help you get payroll right—every time.

Mitul Soni

Mitul is a highly experienced UK Payroll professional with over 14 years of expertise in payroll processing, compliance, client management, and team leadership. He is recognised for ensuring seamless compliance with UK payroll regulations and building strong client relationships through the delivery of accurate, high-quality payroll services.

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