Make a payroll correction for a previous tax year
This article explains how to make a payroll correction for a previous tax year in FreeAgent.
Please note that FreeAgent's payroll functionality won't be available if you have an unincorporated landlord or non-UK account type, or if you're preparing your accounts using cash basis accounting.
Any amendments to filed payroll or late submissions will need to be made within six years using a further Year to Date (YTD) FPS (Full Payment Summary) and EPS (Employer Payment Summary).
The option to make a correction for a previous tax year in FreeAgent will only be available after 19th April of the following tax year (from 20th April onwards). This means that once you’ve filed, or marked as filed, month 12 payroll for the tax year in question and if there are no account locks in place dated after the month 12 payslip, you can make a correction. Please note that you can't edit payslips that are dated in a locked period.
To make corrections for a change that happened mid-tax year, such as a tax code amendment, you’ll need to edit each impacted payslip individually. You can only edit a payslip in a previous tax year if you have full (level 8) access to your FreeAgent account.
If changes are required to multiple payslips in different months, you would report all of the changes to HMRC together in one submission. To do this, select 'Save changes' after each individual correction until the final amendment has been made, and then report the corrections to HMRC. This is because the changes are reported to HMRC in a 'Year to date (YTD) Full Payment Submission (FPS)' and Employer Payment Summary (EPS) which submits updated month 12 year to date figures, rather than specific changes for each of the individual months. You'll be able to view the submission containing the details of the corrections by exporting a PDF of the submission data for month 12.
We also recommend that you save a copy of all the employee’s payslips before editing the figures as it won’t be possible to undo the changes or view the original figures in FreeAgent once they’ve been updated. Please note that edits to earlier payslips will cause later payslips to be recalculated and could cause the Income Tax and National Insurance deductions to change.
If you claimed Employment Allowance for the tax year you are correcting and then changed to 'Don't Claim' the following year, or vice versa, please ensure that your payroll settings have this enabled before submitting a correction. After submitting your correction, please remember to change your settings back so these are correct for the current year.
Any corrections to the CIS deductions suffered during the tax year will be included in the RTI submission made to HMRC. If you edit payslips, FreeAgent will recalculate the CIS offset adjustment. The offset is purely an accounting adjustment and does not affect what is reported to HMRC. The updated Year to Date total for 'CIS Deductions Suffered' will be reported on the EPS. Find out more about the CIS offset.
Making a payroll correction for a previous tax year
1. Navigate to the relevant pay period
Begin by navigating to the Payroll screen in FreeAgent and selecting the relevant tax year from the drop-down menu.
Select ‘Make corrections’ in the top-right to unlock the payslips for that tax year.
Select the relevant payroll month from the drop-down menu.
2. Edit the payslip
To view a particular employee’s payslip for that month, choose ‘View Payslip’ next to the employee’s name.
Select ‘Edit’ to the right of the payslip to edit an employee’s payslip.
We strongly recommend that you save a copy of all the employee’s payslips before editing the figures as it won’t be possible to undo the changes or view the original figures in FreeAgent once they’ve been updated. Edits to earlier payslips will cause later payslips to be recalculated and could cause the Income Tax and National Insurance deductions to change. You can export the figures on each payslip by using the Export All Data feature.
Make the necessary changes and select ‘Save and report corrections’ at the bottom of the screen if this is the only payslip you need to correct. If you need to edit additional payslips, for example for a change that happened during the tax year that impacts multiple payslips, select ‘Save changes’ and repeat this process for each payslip you need to correct.
3. Report the corrections to HMRC
Once all the relevant payslips have been updated, select 'Report corrections'.
Check that the updated year-to-date figures are correct.
If you need to make further changes, select ‘Return to Payroll Overview’ and make the necessary changes.
Once you’ve made the necessary corrections, select ‘Run and report corrections’.
Please note that if you or your accountant file payroll outside of FreeAgent, you can mark payroll as filed in FreeAgent without making an FPS corrections submission to HMRC by ticking the ‘Don’t report corrections to HMRC’ checkbox.
Next, enter your Government Gateway credentials in the pop-up window and select ‘Report payroll corrections’ to complete the process.
In accordance with HMRC guidance, FreeAgent will then submit your corrections to HMRC by sending an additional FPS and EPS with the correct year-to-date figures and set ‘H - correction to earlier submission’ as the ‘Late reporting reason’ field.
We strongly recommend that you save a copy of the IR mark from your submission to HMRC before making any additional corrections, as it will be lost.
You'll be able to view the submission containing the details of the corrections by exporting a PDF of the submission data for month 12.