How to close your payroll
This article explains how to send your final payroll submission to HMRC to close your PAYE scheme using FreeAgent.
Please note that:
- FreeAgent's payroll functionality won't be available if you have an unincorporated landlord account or are preparing your accounts using the cash accounting basis
- all employees will need to have been reported as leavers in an earlier Full Payment Submission (FPS) before closing your payroll scheme
- you’ll need to deduct and pay any outstanding tax and National Insurance to HMRC within 17 days of closing your payroll scheme (14 days if you’re paying by cheque) as per HMRC’s guidance
- you’ll need full (level 8) access to your FreeAgent account to follow the steps below
1. Add a leaving date to each payroll profile
First, you’ll need to enter a leaving date in each employee’s payroll profile in FreeAgent and process the final payroll for them.
Please ensure that the details of each employee’s pay for the tax year is correct before adding the leaving date as you won’t be able to edit previous month’s payslips once the leaving date has been submitted to HMRC.
2. File the payroll to HMRC to report the employees as leavers
Next, navigate to the ‘My Money’ tab at the top of the screen and select ‘Payroll’ from the drop-down menu.
Select ‘Prepare Month [X] Payroll’ in the top-right of the screen.
Check that the information on the payslips is correct.
If you need to pro-rata any of the employee’s payslips, select ‘Edit Payslip’ to the right of the relevant employee’s name.
Scroll down to the ‘Pay’ section and make the relevant changes.
Select ‘Save Changes’ at the bottom of the screen to complete the process.
Once you have entered all the required information, select ‘Run & Report Month [X] Payroll’ at the bottom of the screen.
Next, enter your Government Gateway credentials in the pop-up window and select ‘Run & Report Payroll’.
3. Run the final payroll and enter the PAYE scheme closure date
To run the final payroll that is used to report the closing of the payroll scheme, select ‘Prepare Month [X] Payroll’ in the top-right of the screen.
Tick the ‘Close this payroll scheme’ checkbox and enter the date you would like to close your PAYE scheme in the ‘Date’ field. Please note that this must be on or after the date on the last payslip for your employees or the start of the tax year (6 April), whichever is later. The date cannot be set in the future.
Once you have entered all the required information, select ‘Run & Report Month [X] Payroll’ at the bottom of the screen. If you try to submit the payroll before the beginning of the tax month, e.g. before 6th March if you’re filing Month 12 payroll or 6th April if filing Month 1, you’ll receive an error message.
The error will be because the submission does not fall within the eligible filing period. To resolve this issue, you’d need to go back into the payroll month after the beginning of the next tax month and run the payroll again to file the submission.
Next, enter your Government Gateway credentials in the pop-up window and select ‘Run & Report Payroll’ to complete the process.
FreeAgent will submit your final payroll submission to HMRC to close your PAYE scheme.
If you close your payroll mid-way through the tax year and you’ll be filing Self Assessment or Final Accounts and Corporation Tax through FreeAgent, you’ll need to roll forward payroll, marking each month as filed, until month 12 has been marked as filed. This is to complete the tax year in your accounting records in FreeAgent.
What happens if I need to start paying staff again?
We would recommend that you check with HMRC whether you can use your existing PAYE reference. HMRC states: “If you start employing anyone in the same or next tax year, you should reopen your PAYE scheme by sending an FPS with your PAYE reference.” If you start paying staff in a later tax year, you’ll have to register with HMRC again to obtain a new PAYE and Accounts Office Reference. You can then update your business’s details with these new reference numbers.