⚠️ Our Disability Tax Guide guidance has moved to the LITRG website. If you have a query about any of the issues we cover in this section, please let us know by filling in the Contact Us form.
Calculations and submissions: online filers
Taking on an employee
If you are an online filer, there are two main submissions that you need make to HMRC using your payroll software
Details of the submissions that paper filers need to make, can be found here.
Full Payment Submission (FPS)
The FPS is the main submission that must be made to HMRC under the Real Time Information (RTI) system.
Your payroll software will record your employee’s pay, calculate deductions from their pay like tax, National Insurance (NIC) or student loan repayments and calculate any employer’s NIC that you will need to pay on their earnings. Once this has been done, you will need to submit this information to HMRC in an FPS which will be generated and sent by your payroll software. You can read more about the FPS on GOV.UK.
In addition to pay and deductions information, certain employer information must be reported including the HMRC Office number and PAYE reference number. Information must also be included regarding the employee’s identity such as the employee’s full name, date of birth, address, National Insurance number, payroll ID (if any) and start/leave date (if this is the first/last time you are paying them).
The FPS must contain details in relation to all employees. This includes payments to employees who earn less than the Lower Earnings Limit – £120 per week 2021/22. (Remember that a PAYE scheme is only required to be set up where at least one employee earns at or above the Lower Earnings Limit (or has another job or pension), so if all employees earn below this amount and have no PAYE income from elsewhere, there is no requirement to establish a PAYE scheme.)
Most employers should submit the FPS to HMRC on or before their employees’ pay day (although there are some exceptions to this – see GOV.UK for more information). The FPS includes a special field to identify if an exception applies, using letters codes as provided by HMRC. This may help prevent HMRC from seeking to apply a penalty in respect of the late FPS.
One of the main exceptions is the non-banking day exception. This essentially says that where employees are paid a day early because their regular pay day falls on a non-banking day (for example, weekend or bank holiday), their employer should not use the earlier pay day in the payment date field, but should use the contractual pay date. This is set out clearly in their HMRC’s further Guide to PAYE and NIC CWG2 at paragraph 1.8 where examples are given.
It is important for employers to use the correct date in the payment field, especially where their employees are claiming universal credit, as putting in the wrong date can cause a ‘two monthly wages in one assessment period’ problem for them, as explained further on our main LITRG site.
To complete and send the FPS, follow your payroll software’s instructions. If you need help, HMRC have guidance on what to put in each field on an FPS on GOV.UK.
Users of HMRC’s Basic PAYE Tools (BPT) should check the user guide which contains step-by-step help on the most common functions of BPT, including how to input the relevant FPS data each pay day and how to submit it to HMRC online – note that you will need to enter your Government Gateway User ID and Password at this stage of the process.
If you receive an authentication error message when submitting payroll information using BPT, it probably means your User ID or Password have been entered incorrectly. Check that you have not entered too many characters or made a typing error – for example using 1, I or l (the number one, capital letter I, lower case letter l) incorrectly, or using O instead of 0 (letter O, digit zero) or vice versa. If you have checked and still receive an error message then you will need to contact HMRC online services helpdesk (0300 200 3600). If you enter the incorrect details repeatedly, you may be temporarily locked out of your PAYE Online for Employers account.
You can check PAYE Online for Employers service availability and issues on GOV.UK - problems with services.
Please note that there has been some confusion as to the purpose of the ‘Irregular Payment Pattern Indicator’ field and when and how it should be used. HMRC have confirmed the position as follows:
- If an individual is paid irregularly, but is always paid at least once every three months, or is reported on each regular FPS, then you do not need to set the irregular payment indicator.
- If your employee is paid on an irregular basis and is unlikely to be reported on an FPS for three months or more, you need to set the irregular payment indicator to ‘Yes’ on the FPS.
- Unless you set the irregular payment indicator or the appropriate pay frequency field, HMRC will assume that an employee who has not been reported on the FPS for a period of time has left that employment.
Sometime after you have sent your FPS, you should be able to view your submitted FPS and how much you owe to HMRC in your PAYE Online for Employers account. Exactly when, will depend on when you send the FPS in. For more information on viewing your online account and what to check if it is not as expected, see GOV.UK. Your payroll software should also show you the payment due to HMRC for any tax month period.
For guidance on what to do if you make a mistake on an FPS, for example, you need to correct any under-reported amount of pay or deductions, see our getting things wrong page.
Employer Payment Summary (EPS)
The amounts recorded on the FPS will be used by HMRC to work out what payments to expect from the employer. But the amount that you actually owe may be affected by matters not mentioned in the FPS such as recovery of statutory payments made to employees (such as Statutory Maternity Pay).
In these situations, an EPS must be created and submitted to inform HMRC of amendments to a liability calculated from the FPS (this will be done by your payroll software). If you have no adjustments to report for any pay period, no EPS is required. You can find out more about the EPS on GOV.UK.
An EPS is also used to claim the Employment Allowance.
In addition, if an employer does not pay any employees in whole tax month (6th of one month to the 5th of the next) an EPS will need to be submitted to HMRC indicating that no payments have been made. Please note that this is different to the situation where you do not pay your employee for a week say, but you pay them for the rest of the tax month as normal – you do not need to submit an EPS for the unpaid week (it is not really necessary but you could send a ‘nil’ FPS for this purpose if you wanted to).
If you do not file an EPS when you have made no payments at all in a tax month, HMRC may assume that you have simply forgotten to file and may estimate how much you should pay.
You should make sure that you send the EPS by the 19th of the following tax month.
If, rarely, your payroll software does not include the EPS functionality you can submit an EPS using HMRC's Basic PAYE Tools (BPT).
To complete and send the EPS, follow your payroll software’s instructions. If you need help, HMRC has guidance on what to put in each field on an EPS on GOV.UK.
Users of HMRC’s Basic PAYE Tools (BPT) should check the user guide which contains step-by-step help on the most common functions of BPT, including how to tell HMRC that you did not pay any staff wages in a whole tax month – note that you will need to enter your Government Gateway User ID and Password to submit the EPS.