If you run a weekly payroll you might find you need to complete an additional period after week 52 to finish your PAYE tax year.
If your normal repeating pay date falls on the 5th April you have to complete the additional period for your tax year to be complete.
When it is a leap year you will also have an additional period if your pay date falls on the 4th April.
If your normal repeating pay date does not fall on either the 4th (Leap Year Only) or 5th of April your last period will be week 52.
How does this affect the Tax/NI Calculation?
The NI calculation is performed exactly as it is for every other pay period.
The only change to the tax calculation is all employee are switched to a week1/month1 equivalent of their tax code. This will ignore any previous pay and tax for the year and perform the calculation solely on the gross taxable pay for the period. Kashflow will do this automatically if processing week 53.
While this is the correct method required by HMRC to deal with these extra periods it can cause some confusion. In some circumstances using a week1/month1 tax code for week 53 can cause the employee to pay too little tax for the year. Should this happen the employee will receive a P800 from HMRC advising them on the calculated tax for the year and what is owed. HMRC will usually deal with this by issuing a new tax code for the employee to deduct the shortfall in tax in the following tax year.
As an employer you do not need to do anything in payroll until HMRC issue a change of tax code notice.
For further details on week 53 payments please refer to the HMRC CWG2 document “Employer Further Guide to PAYE and NICs” – Click here.