As the festive season approaches, many employers choose to pay staff earlier than usual in December. While this can be a welcome boost for employees, it also raises important considerations for Real Time Information (RTI) reporting to HMRC. Incorrect treatment of early payments can lead to confusion for employers and mismatches in PAYE records.
Below is a summary of the key rules and best practices to ensure your payroll remains fully compliant.
Make sure you use the contractual pay date in your RTI submission
As HMRC requires employers to report the contractual payments date and not the date the payments are actually made when submitting a full payment submission (FPS).
This means if you normally pay staff on 25th December, but you will instead pay them on 20th December, your FPS must still show 25th December as the payment date. With this applying even if the earlier payment is made due to bank holidays, Christmas closure or cash-flow planning.
Using the contractual pay date ensures the payment is taxed in the correct period, universal credit and other benefits are calculated correctly for employees and that HMRC does not treat the early payment as an additional payment.
When to send the FPS?
In the scenario detailed the following should occur:
- Pay early (e.g. 20th December) you must submit the FPS on or before the original contractual date.
- In the FPS, still report the contractual date (e.g. 25th December).
Be aware that if over the festive period businesses are closed, that late submission penalties can apply if these are not filed on time – this can be submitted early to prevent this possibility.
Impact on National Insurance, PAYE and Student Loans
There is no impact on these calculations, as these will still follow standard rules based on the pay period and earnings, regardless of payments timing. The only correction needed is the reported payment date.
Any questions?
If you have any questions about RTI submissions and early payments, please get in touch with your usual contact at Wheelers, who will be happy to assist.
Article by Sam Chapman, ACA