Year End Process

Year End Processing Summary

There is a standard process to be followed when moving a Payroll from one tax year to the next:

Unless specifically stated the following are undertaken per payroll.

• Process the final period of the tax year

• Submit the final FPS of the year to HMRC

• Use the 'New tax year' function to create the Payroll for the new tax year

• Confirm Payroll Settings are loaded for new tax year (held at system level)

• Run the “Statutory Rate Review” function from the payroll screen to apply new statutory rates to ongoing and upcoming leave requests.

• Run the 'Uplift tax code' function to uplift tax code suffixes L, M and N and change Week 1/Month1 basis to cumulative

• Download P9 tax codes (these are automatically downloaded after tax codes have been uplifted - downloaded for all employees linked to the Employer that is associated with the Payroll the uplift was processed for)

• Apply downloaded P9 tax codes to employee records

• Publish/print P60s

• Create and send final EPS for 2024/25 

Closing down the Current Tax Year

The last Pay Run of the tax year will be marked with 'Final' in its name e.g. March-2025-Final.

Creating the Final FPS (Full Payment Submission) of the Tax Year

Once the last Pay Run of the year is finalised a final FPS (Full Payment Submission) should be created and submitted to HMRC. This is the same as a normal FPS except the FPS will be updated with an indicator to confirm it is the final FPS of the tax year.

Click on the FPS button:

Proceed to check your FPS as normal and submit to HMRC (see Creating and Submitting an FPS for further information).

Note: Final submission indicator has been set to yes

Check Tax Year 2025/26 Payroll Settings

2025/26 Payroll Settings must be applied prior to the Uplift tax code routine being processed as Payroll Settings hold the new tax year uplift values that are to be applied.  Payroll Settings also hold Tax, NI threshold rates and bands, Postgraduate and Student Loan thresholds, revised Court Order tables etc for the new tax year. Payroll Settings will be applied by the XCD Release team as part of the year end upgrade.

Please check that all Payroll Settings have been updated for the new tax year 2025/26.  This can be checked as follows: 

• Go to 'Payroll Settings'

• Select 'All' from the drop down

• Reorder using Tax year or use the filter to display only 2025/26 settings

If there are no 2025/26 settings, please contact Payroll Support.

Creating a New Payroll for 2025/26

Note: Payrolls with 'permanent' eligibility' should be created last i.e. after payrolls with other eligibilities have been created. If this causes any issues due to timing of when payrolls are to be processed please contact Payroll Support for guidance.  

From the 'Payroll' tab click on the link to the payroll record of the payroll to be processed:

Then select the ‘New Tax Year’ button:

A new payroll will not be able to be created until the final FPS from the previous payroll has been successfully submitted to HMRC i.e. has a status of ACCEPTED. 

All relevant information from the Payroll for the previous year including pay day cut off and period start dates etc will be copied to the new Payroll record.  Check all information is correct.

Please note: Payroll admin use the payroll name to describe Payroll when setting up a new UK net payroll. A Public calendar with the exact payroll name should be created before the new payroll is created for the new tax year if you wish the system to auto populate the key dates into the payroll calendar. For detailed steps of how to set this up, please refer to Payroll calendar section

The Payroll field must be manually populated - good practice is to enter a description the same as the previous year but appended with the latest tax year.

 If Employment Allowance is being claimed then from the start of the 2020/21 tax year a new claim is to be made every year i.e. a claim for Employment Allowance in the previous tax year does not carry into the new tax year. To ensure that the existing claim does not continue into the new tax year the 'New tax year' process will not bring across the Employment allowance value from the previous year Payroll.  If the claim is continuing an ‘Employment allowance’ value should be entered for the new tax year.  The Employment Allowance value (£10,500) can be entered against one payroll or split over a number of payrolls linked to the Employer. See Employment Allowance section at end of this page detailing Employer and Payroll set up.

If the Apprenticeship Levy is to be apportioned over more than one Payroll then the proportionate value should be entered against the 'Estimated apprenticeship levy allowance' field.

Check all information is correct and click on the Save button.  

The system will create the new Payroll and Pay Runs for the new tax year.  Make a note of the new payroll reference number as this might be required on any custom reports where you manually change the filter. 

The key dates will be auto-populated against each Pay Run based on the rules defined against the Payroll. if there are any dates to be changed e.g. where the pay date may fall on a weekend these can be changed now, or alternatively when the actual period in question is reached. 

Review Statutory Rates

From the 2025/26 tax year XCD has introduced a new function to allow a payroller to ‘push’ the new statutory rates onto the leave requests that either cross the tax year, or fall completely within the new tax year (by default the system uses the current years figure if the payroll settings for the new year don’t yet exist).

This is a required step, the system will not allow you to prepare the first pay run until this function has been pressed.

You will be presented with a pop up confirming the rate change is to be applied.

Take note, any previously approved leave with a change in payment value will re enter the approval review screen for confirmation before changes to payments will be made.

Tax Code Updates

Tax codes for the new tax year should be applied in the following sequence:

• Uplift tax codes

• P9 tax codes will be automatically downloaded after tax codes have been uplifted. They will be downloaded for all employees linked to the Employer that is related to the Payroll that is being processed and shown on the HMRC Incoming Data screen

• Check for non-matched records (see HMRC Incoming Data - Unmatched Records video)

• Apply downloaded P9 tax codes to Employee records

• Download P6 tax codes

• Check for non-matched records

• Apply downloaded P6 tax codes to Employee records

• Manual updates to employee record as appropriate

Uplift Tax Code

After a new tax year has been created for a payroll the 'Uplift tax code' function should be processed - this must be processed per payroll. This will uplift employee tax codes for suffix letters according to Payroll Settings for the relevant tax year. For the 2025/26 tax year the uplifts are frozen by the government so should all be 0,  L 0, M 0 and N 0. The 'Uplift tax code' routine will also change the Week 1/Month1 indicator to Cumulative.

Note: there are 3 separate Payroll Settings for 'Tax code uplift' - for rUK, Scotland and Wales. As the personal allowance is the same currently across the whole of the UK each of the settings hold the same values.

Click on the Uplift tax code button from the new payroll screen.

Note - the Uplift tax code button will only be available if a previous year version of this payroll exists e.g. the new payroll created is for tax year 2025/26 so check is that the same payroll existed for 2024/25.

The following message is then presented to the user advising which tax codes have been updated, and that the system will processed to download P9 tax codes from HMRC:

Click OK to start the uplift of tax codes.  

Important: the uplift tax code must be processed separately for each payroll.

• • All tax codes with suffix letter L, M and N will be assessed for uplift (L 0, M 0 and N 0)

  • Tax codes on week 1/month 1 will be changed to cumulative

  • All Employees who have had their tax code uplifted will have the uplift field on their personal record populated with 2025/2026. This prevents their tax code from being uplifted again.

  • P9 tax codes for all employees linked to the Employer which is associated with the Payroll that the Uplift tax code has been processed for will be automatically downloaded from HMRC

  • The landing page following this action is the 'HMRC Incoming Data' screen (with 'Type' set to P9).

  • You will receive a “SUCCESSFUL” email for each payroll processed 

P9 Tax Codes

The system will automatically download P9 tax codes after tax codes have been uplifted i.e. there is no separate action to download tax codes - this will follow on directly from the 'Uplift tax code' function.

If you are processing a new tax year for the first time the system will download P9s for the previous six years. Contact payroll support if this happens and the old codes will be removed.

The 'Status' will default to 'Match' - all tax code records downloaded from HMRC that have a direct employee match on the selected Employer will be displayed.

To view downloaded records that have not been matched to employee records within the system change the Status to 'No match'. Click on the Apply button to refresh data returned by changing the filter.

Applying P9 Tax Codes to Matched Employee Records

Updating employee records with the downloaded P9 tax codes is a separate user action.  

Only employees attached to payrolls that have already been moved into the new tax year will be available i.e. although tax codes are downloaded for the entire employer, any employees attached to a payroll that is still in the previous tax year cannot have a downloaded P9 tax code applied to their record.   

Click on the checkbox to the left of employee name to select employee(s) that are to be updated. 

Select employee(s) that are to be updated by clicking on checkbox to left of the employee name. Click on the checkbox on the header row to select all employees.

Click the Save & confirm button to apply the downloaded tax codes to the selected employee records.  

Note: if there are multiple tax codes for the same employee they will be actioned in issue date order. 

Use the 'No Match' filter to check for any records that have been downloaded from HMRC which do not have an exact match to an employee record.

Applying P9 Tax Codes to Non-Matched Employee Records

To link an unmatched downloaded record to an existing employee click on the HMRC Detail link from the HMRC Incoming Data screen.

From the Third Party Detail record that opens click into the Employee field and find the appropriate employee: 

Click the Save button. This downloaded record will now be associated with the correct employee.

Click on the checkbox on the heading row to highlight all records for update.  Alternatively select only the individual records to be updated by clicking on relevant checkbox to left of employee name.

Click the Save & confirm button to update the selected employee records.  These records can then be viewed against a Status of 'Updated manually'.

P60s

Publishing P60s

From the HMRC tab, click on the Publish P60 button

Select the relevant Payroll, Tax year and Status ‘Ready to publish’.  Select employees for whom P60s are to be published using the check boxes to the left of the employee name: 

Click on Publish P60 button:

Confirm by clicking on the Publish P60 button on the message.

An email will be sent to each selected employee advising that their P60 has been published.  A link to the P60 will be included on the email.

The system returns to the Publish P60 screen with Payroll and Tax year auto-populated.  

Printing P60s

P60s can be printed once the Final FPS has been accepted and P60s have been published.

To print P60s change Status to ‘Published’:

Note - an individual P60 can be viewed by clicking on View P60 for selected record.

Click on the Print P60 button

From the drop down select ‘All’ or if appropriate individual departments.

Click Print P60 button.

Click OK.

An email will be sent to the Administrator with a link to the P60s PDF files that have been created.

The number of files generated will be dependent on the batch size set. 

Batch size will be set by default to 100 i.e if there are 500 P60s then 5 files will be generated.

Note: the batch size is defined against Custom metadata types > Batch settings > P60batch

P60 PDF Filenames

The file naming convention is:

Name of first employee in file_payroll number for first employee_name of last employee in file_ payroll number for last employee_<P60s>_number of P60s in file_tax year.pdf

e.g. Steven Jones_Y 5_Roger Miller_Y 6_P60s_3_2022.pdf

Creating Final EPS (Employer Payment Summary)

After a final FPS has been successfully submitted to HMRC for each payroll attached to a particular employer the final EPS (Employer Payment Summary) can also be submitted.

Note - period 1 of the new tax year can be processed for a payroll whilst other payrolls attached to the same employer are still being finalised for the previous tax year i.e. there is no requirement to submit an FPS for every payroll and send the EPS before starting processing period 1 of the new tax year. 

Other information for 2025-26 Tax Year  

Previous Year FPS 

From April 2021 only corrections for tax years up to and including 2017/18 are to be provided through an EYU. Corrections to data submitted for tax years 2018/19 onwards should be submitted to HMRC through a Previous year FPS i.e. the revised YTDs for the tax year are to be submitted rather than the difference. An EYU includes only the difference in YTDs between the last submitted FPS for the appropriate tax year and the revised YTDs. 

To distinguish a current year FPS and an FPS to correct previous year data, the FPS to correct previous year data will be known within XCD as a 'Previous Year FPS'.   

Creating a Previous Year FPS 

• Go to the HMRC tab 

• Click on the Previous year return button 

From the ‘Previous year return’ screen: 

• Select the relevant Employer from the drop down 

• Select the tax year for which corrections are to be submitted  

• Select the pay frequency (Note: a single Previous Year FPS can be created for multiple employees, however all employees must have the same Payroll frequency) 

• Use the check boxes on the left to select Employees that are to be included on the Previous Year FPS 

• Click on the Create return button: 

Notes: 

• If the 'Create return' button is clicked with no employees selected the RTI Submission record will be created for the final period of the selected tax year but with no employees attached. 

• If the selected tax year is 2017/18 or earlier an EYU submission will be created. If the selected tax year is 2019/20 or later an FPS Submission will be created for the selected Employees. 

Click on the RTI- link - only the employee(s) selected above will be included.  

Click on the RT- link to open the individual FPS - make necessary changes and click on the Save button. 

The FPS Submission created will be a clone of the fields against the final FPS for the selected tax year, except for fields below: 

• Date submitted = blank (this will get populated when the FPS gets submitted) 

• Status = Draft (this will get updated when the FPS is accepted by HMRC) 

• No employees = count of selected employees 

• Correlation ID = blank (this will get updated when the file is submitted to HMRC) 

• Late reporting reason = H (Correction to earlier submission) 

• Response message = blank (updated when FPS is submitted to HMRC) 

• Payment date = blank 

A clone of the employee's final FPS record for the selected tax year will be created for selected employees.  If there are any RTI additional records i.e. car or van details these will also be cloned. 

The Previous Year FPS created may contain employees with data from multiple pay periods in the relevant tax year.  Employees who were in employment at the end of the year will have final pay dates that reflect the final period of the tax year, however where leavers are to be included the last pay day may be different for each employee selected. 

Creating a Previous Year FPS for 'New' Employees 

The 'New' button available on the RTI related list allows for an FPS record to be added for an employee who did not previously exist in the system.  

This may be required where an employee was paid in the previous tax year but not paid through the Payroll. Another example may be an employee who had left prior to implementing XCD payroll but had not been added to the Payroll as part of the implementation.  In both these cases it is entirely a manual process to populate all fields on the RTI FPS record.    

Submitting a Previous Year FPS 

A Previous Year FPS is submitted in exactly the same way as a current year FPS: 

• Go to the HMRC tab 

• Select the relevant RTI record and click the Submit button.  

• Click Submit 

A Previous Year FPS record can be identified by - Type = 'FPS' and the Payment date and Tax period are both blank.  

Notes 

• Last pay day: the system will find the FPS record with the latest pay day for each employee, for the tax year selected 

• Statement of Earnings: should be provided to employees (or ex employees where left) detailing any change in details submitted to HMRC.  P60s from a Previous Year FPS are not supported 

• Ledger Reporting: any changes made to employee records will not impact previous ledger files.  If necessary a manual adjustment will be required to the ledger 

• Tracking changes: any changes made to the RTI records are fully auditable 

Employment Allowance Set Up

From 2020/21 Employment Allowance will be classified as de minimis State aid.  New eligibility criteria have been introduced in relation to a claim for Employment Allowance – this is based on the amount of State aid received in the previous 3 years and on the total NIC bill for previous year.  This eligibility decision is made outside of the system i.e. if a claim for Employment Allowance is made then the system assumes there is eligibility to claim.

Further changes from 2020/21 mean that a new claim must be made annually i.e. the claim is not ongoing.

The claim is submitted on the EPS.  The system requires The Employment allowance checkbox to be set to true and appropriate business sector(s) assigned against the Employer, and an Employment allowance value to be set against at least one payroll that is linked to the Employer in order to trigger a claim for the new tax year.

Employer - Employment Allowance Settings

The user must set the Employment allowance checkbox against Employer.  This will remain checked unless manually removed.

There are additional fields relating to business sector that must also be populated to accompany the EPS claim.

Employer page layout:

Select one or more of the sectors from the ‘De minimis State aid business sector’ drop down.  If state aid does not apply i.e. because there is no economic activity being undertaken e.g. charity, sports club etc then instead tick the ‘State aid does not apply’ checkbox and deselect any business sectors (if already selected). 

The total value of Employment allowance YTD across all payrolls will be displayed in the ‘Employment allowance this year’ field.

Payroll - Employment Allowance Settings

To trigger an Employment Allowance claim, the Employment allowance indicator must be set against the Employer AND an Employment allowance value must exist against at least one Payroll linked to the Employer.

The New tax year process will not copy across the Employment allowance value from the previous tax year.  If a claim is to be made for Employment Allowance in the new tax year, a value must be entered against the Employment allowance field for at least one payroll linked to the Employer.

To facilitate the apportioning of costs, the £10,500 (from April 2025) Employment Allowance can be split across multiple payrolls linked to the Employer.