Correcting payroll errors

Correcting pay or deductions

If you’ve made a mistake with an employee’s pay or deductions, you can correct it by updating the year-to-date figures in your next regular Full Payment Submission (FPS).

You can also correct it by sending an additional FPS before your next regular FPS is due. You need to:

• update the ‘this pay period’ figures with the difference between what you originally reported and the correct figures
• correct the year-to-date figures
• put the same payment date as the original FPS
• put ‘H - Correction to earlier submission’ in the ‘Late reporting reason’ field

If you underpaid your employee

Pay your employee the amount you underpaid them. On or before the day of this payment, send an additional FPS with:

• the difference between what you originally reported and the correct amount in the ‘In this pay period’ field
• updated year-to-date figures
• ‘H - Correction to earlier submission’ in the ‘Late reporting reason’ field

Correcting an employee’s National Insurance deductions

If the mistake was in this tax year

Repay or deduct the balance from your employee. Update the year-to-date figures to the corrected amount in your next regular FPS or send an additional FPS.

If you deducted too little, you can’t recover more than the employee’s National Insurance contribution due that month.

Pay any underpayment to HMRC straight away.

If the mistake was in a previous tax year

Send an Earlier Year Update (EYU) with the difference between what you originally deducted and the correct amount.

Use the EYU to tell HMRC if you’ve repaid any refund due to your employee.

If you deducted too little, you can’t recover:

• more than the National Insurance due that month
• any amount from your employee

Correcting an employee’s student loan repayments

If the mistake was in this tax year

Repay or deduct the balance from your employee. Update the year-to-date figures to the corrected amount in your next regular FPS or send an additional FPS.

If you deducted too little, you can’t recover more than the student loan repayment due that month.

If the mistake was in a previous tax year

If you deducted too little, you don’t need to do anything. If your employee wants to know how it affects them, they can contact the Student Loans Company.

If you deducted too much, repay your employee and:

• if you noticed the mistake on or before 19 April, send an FPS with the corrected ‘Student loan repayment year to date’ figure as of 5 April for the previous tax year

• if you noticed the mistake after 19 April, send an Earlier Year Update (EYU) with the difference between what you originally deducted and the correct amount

Correcting your FPS or EPS

If you’ve made a mistake in one of your payroll reports, what you need to do depends on the mistake and when you find it.

If you’ve reported the wrong pay or deductions

To correct a mistake in the same tax year, update the year-to-date figures in your next regular submission.

For previous tax years, send an Earlier Year Update (EYU) showing the difference between what you originally reported and the correct figure.

If your payroll software can’t send an EYU, you can use HMRC’s Basic PAYE Tools.

The rules are different if you find a mistake in your final FPS of the year.

If your employee has stopped working for you

Include them in your next FPS and correct their year-to-date figures. Include their original ‘Date of leaving’ and put the same or a later ‘Payment date’ than the one shown on their final FPS.

Correcting an Employer Payment Summary (EPS)

To correct a mistake in the same tax year, send an EPS with the correct year-to-date figures.

For previous tax years, send an EPS with the correct year-to-date figures for the tax year where you made the mistake.

Correcting your employee’s personal information

Correct your next FPS if you’ve made a mistake with your employee’s personal details.

Don’t report updates to more than one of your employee’s personal details (eg their name, date of birth or gender) in the same FPS. Your payroll records may be duplicated if you do, and your PAYE bill might be wrong.

If your employee’s details (eg their address or surname) change:

• they must tell HMRC straight away
• you need to update your payroll records

Correcting an employee’s start or leaving date

If you put the wrong start or leaving date for an employee in your FPS, update your payroll records with the correct date.

Don’t report the amendment in your next FPS as this may create a duplicate record for the employee.

Correcting the payment date in your FPS

If you’ve sent an FPS with the wrong payment date, send an additional FPS with the correct payment date. Write ‘H - correction to earlier submission’ in the ‘Late reporting reason’ field.

Send your corrected FPS by the 19th of the tax month after you sent your original FPS. HMRC will apply the correction to the right month.

Correcting FPS reports sent in advance

If you’ve sent FPS reports in advance that need to be corrected (eg because an employee leaves), you should:

• send another FPS for the tax month the correction relates to, making sure you fill in all relevant fields and revising the year-to-date figures if needed

• correct any other FPS reports you sent in advance that are affected by the change

Correcting an employee’s National Insurance category letter

How you do this depends on why the category letter changed, and in which tax year.

You’ve used the wrong category letter in the current tax year

In your next FPS:

1. Add the category letter you’ve used incorrectly.

2. Put ‘0’ in all National Insurance fields for this category letter except ‘Employee’s NICs this payment’, and enter the amount you have repaid or recovered here, eg put -£300 if you’re repaying an employee’s overpayment of £300.

3. Add the correct category letter, and enter the correct year-to-date National Insurance for this category letter.

4. Put ‘0’ in all National Insurance fields for the incorrect category letter for the rest of the tax year - you don’t need to do this if the category should never have been used.

Your employee’s category letter changed during the tax year

In your next FPS:

1. Continue to report year-to-date information for the old category.

2. Put ‘0’ in all ‘In this pay period’ fields for this category, and use the ‘Employee’s NICs this payment’ field to adjust any underpayment or overpayment of National Insurance.

3. Add the correct category letter, and enter the correct year-to-date National Insurance for this category letter.

If the mistake was in a previous tax year

Send an EYU with:

• negative amounts in all the National Insurance year-to-date fields in the incorrect category letter, to reduce the employee’s National Insurance to zero

• the correct category letter and correct year-to-date National Insurance

If the mistake caused an overpayment or underpayment

You’ll need to correct your employee’s National Insurance deductions if they paid too little or too much because they were on the wrong category letter.

Correcting payments to HMRC

What you need to do to correct a payment depends on whether you paid too much or too little, and how the error occurred.

If you’ve paid HMRC too little

If you underpaid because of a mistake in your Full Payment Submission (FPS) or Employer Payment Summary (EPS), correct it in your next regular report. HM Revenue and Customs (HMRC) will add the underpayment to your next PAYE bill.

If you underpaid because you entered the wrong amount when paying HMRC, pay the balance as soon as possible or you may have to pay interest or a penalty. Use your Accounts Office reference when paying.

If you’ve paid HMRC too much

If you overpaid because of a mistake in your FPS or EPS, make the correction in your next regular report. HMRC will take the overpayment off your next PAYE bill.

If you overpaid because you entered the wrong amount when paying HMRC, or you made a duplicate payment, you can balance your account by paying less in your next PAYE bill.

HMRC will repay directly into your account if you’ve sent an EPS with your bank details.

Write to HMRC with your bank details if you can’t include them with your EPS.

Reclaim an overpayment for a previous tax year

You need to work out why you overpaid before you can reclaim an overpayment for a previous tax year.

Work out why you overpaid

Compare what you’ve paid HMRC with what you’ve owed in your tax account. You may have overpaid if your payments didn’t take into account:

• an overpayment carried over from a previous tax year
• Statutory Sick Pay (SSP) or statutory pay for parents that you were entitled to reclaim
• any repayments made to employees, eg because you used the wrong tax code
• any corrections to your reports
• student loan deductions
• employees who left, eg because you didn’t report them correctly to HMRC
• any incentive payments from HMRC to send reports online
• any Construction Industry Scheme (CIS) deductions, or if you made deductions incorrectly

You also may have overpaid if you paid HMRC:

• for the wrong tax year
• more than once for the same bill
• an estimated amount in advance

For duplicated or estimated payments, tell HMRC what you paid, what you should have paid and why you paid the additional amount.

Making your claim

Once you know why you’ve overpaid, you can claim your repayment from HMRC. You’ll need to tell them:

• your business’s name and address
• your PAYE reference - this is in your employer registration letter from HMRC
• your contact telephone number
• how much you’ve overpaid - for each tax year you’re claiming
• the tax month you overpaid in (if possible)
• why you overpaid - for each tax year you’re claiming
• whether you’ve claimed this overpayment before

HMRC will offset the amount against your PAYE bill in the current tax year. If you don’t owe anything, they will:

• offset the amount against a PAYE bill from a previous tax year
• offset the amount against other taxes you owe eg Corporation Tax

You’ll only get a refund if you don’t owe HMRC any tax.

You must apply by letter if your company has been dissolved or struck off.