At the beginning of November I received a P6 notice for one of my client's employees. It also showed previous pay and tax figures from the employee's last job. The previous pay figure was only about twice the tax figure which I thought a bit odd at the time, but entered the figures in the payroll software anyway, which resulted in a largish (£1,400) tax rebate in her November pay. Then at the beginning of December I received another P6 with the same tax code but this time with a different previous pay figure, nearly £10,000 more than on the other P6. I phoned HMRC and they confirmed that the second figure was the correct one. (The tax figure was the same). They said they had "no idea" where the other figure had come from!! (Typically useless).
Anyway, my question is, do I now enter the new figures into this month's adjustment figures in the payroll software "as is" or should I add November's pay to it as well, or enter the difference between the two figures in December? Also do I enter the tax figure again or leave this blank?
The answer depends on your payroll software. If it is well written it should have a simple option to enter P6 figures directly, they would overrule P45 figures automatically, and that would be job done.
EDIT: Sorry, I see that the previous wrong figures were also a P6. In which case just replace the previous P6 figures that you entered with the new ones.
-- Edited by Tom McClelland on Friday 14th of December 2018 09:07:58 PM
Thank you for the reply. I am using Moneysoft payroll software. I don't think I'll be able to overwrite the previous figures as that pay period (November) is now locked, although I can unlock it. However, if I do that, won't it change the November pay for the employee?
I don't know Moneysoft. You shouldn't need to overwrite previous pay figures. There should be a space for explicitly entering P6 figures, I would have thought. Just do it in the current period. Ignore past periods.
Thank you Tom. I have already entered the previous pay and tax figures from the first P6 as per those instructions. Think I will just now enter the new figure for previous pay in the relevant box in this pay period. I wont enter the tax figure again as it is the same.
Thank you Tom. I have already entered the previous pay and tax figures from the first P6 as per those instructions. Think I will just now enter the new figure for previous pay in the relevant box in this pay period. I wont enter the tax figure again as it is the same.
I don't have Moneysoft, so I can't be sure what it is expecting, but if you're changing the previous pay then I would re-enter the tax too, or Moneysoft could reasonably believe that you now mean the previous tax to be zero.
Looking at their design it seems plausible (though this would be bad design in my opinion) that you actually enter the adjustment to previous pay and tax in the current period, not the new total. I would be guided by experience and knowledge of how the current period tax should stack up after you've done this. Try one method and see if the PAYE deduction outcome in the current period seems reasonable. If it seems unreasonable then enter previous pay and tax as an adjustment rather than an absolute figure.
OK, many thanks Tom. Putting in the new figures in this period, including the tax figure, means that she will have 50% tax deducted from her wages (it should be more, but it's limited to 50% of her taxable pay). Which I supposed makes sense when she had such a large tax refund last month that she shouldn't have had.
Good thing about Moneysoft - you can run a test scenario via the 'test company'. Or better still, back it up, amend what you want to, restore if it doesnt quite work and try again a different way.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Yes its quite a user friendly software Unfortunately this scenario means the employee pays 50% of her salary in tax this month! It should be more but its limited to 50%
