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.

Find out how to add a leaving date to a payroll profile.

Leaving details area to input leaving date and if they are leaving during next pay run.

2. File the payroll to HMRC to report the employees as leavers

Navigate to the ‘My Money’ tab at the top of the screen and select ‘Payroll’ from the drop-down menu.

Payroll highlighted in drop-down menu under My Money on the overview page.

Select ‘Prepare Month [X] Payroll’ in the top-right of the screen.

'Prepare Month [x] Payroll' button highlighted in payroll page header.

Check that the information on the payslips is correct.

Step 2 to review and edit payslips for preparing month [x] payroll.

If you need to pro-rata any of the employee’s payslips, select ‘Edit Payslip’ to the right of the relevant employee’s name.

'Edit Payslip' button highlighted next to employees' listings.

Scroll down to the ‘Pay’ section and make the relevant changes.

Pay section of payslip.

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.

'Run and Report Month [x] payroll' button highlighted at bottom of page.

Next, enter your Government Gateway credentials in the pop-up window and select ‘Run & Report Payroll’.

'Run and Report payroll' button highlighted on pop-up window.

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.

'Prepare Month [x] Payroll' button highlighted in payroll page header.

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.

Step 3 to detail payroll scheme closure for preparing month [x] payroll.

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.

'Run and Report Month [x] payroll' button highlighted.

Next, enter your Government Gateway credentials in the pop-up window and select ‘Run & Report Payroll’ to complete the process.

'Run and Report payroll' button highlighted on pop-up window.

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?

Simply roll forward payroll by marking each of the historical months as filed, up to the month you wish to start paying staff again and file an FPS or EPS submission to HMRC.

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.

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