Prepare for the new tax year

Prepare for the new tax year by reviewing and updating payroll in Xero to meet regulations.

Review employee codes for the new tax year

We've updated payroll to follow regulations for the new tax year. This includes:

  • Increasing tax codes ending in L, M and N.
  • Resetting any previous W1/M1 calculation methods to cumulative for the new tax year.
  • Carrying over all other authorised tax codes for you to review. For example, we've updated 1150L tax codes to 1185L.

Use the P9X form for new tax codes (GOV.UK website) to figure out which codes to change or carry forward for the new tax year.

Update employee tax codes:

  1. In the Payroll menu, select Employees.
  2. Click the employee you need to update.
  3. Click the Taxes tab.
  4. Click New tax code:
    • Under Tax code, enter the new code.
    • (Optional) Select the W1/M1 (Non-cumulative) checkbox.
    • Under Effective date, select when the new code will take effect.
    • Click Save.
  5. Click Save.
If you have employees who are Scottish taxpayers, you'll add an S prefix to their tax code. Eg change 1185L to S1185L.

Update pension contributions to account for increases

Minimum pension contributions have increased for the new tax year. See Increases in minimum contributions for automatic enrolment pensions (The Pensions Regulator website).

Update your pension contributions to account for the increases. You should then check the changes on your employees' pay templates.

It's also a good idea to check your employee's National Insurance Category is up-to-date. See Enter an employee's employment details.

Update pension contributions:

  1. In the Settings menu, select Payroll Settings.
  2. Click the Workplace Pension tab.
  3. For organisations with PensionSync:
    • Click Refresh Scheme Details.
  4. For organisations without PensionSync:
    • Under Employees’ Contribution and Employer’s Contribution, increase the Percentage or Amount.
    • Click Save.

Check pension contributions on pay templates:

  1. In the Payroll menu, select Employees.
  2. Click an employee’s name to open their details.
  3. Click the Pay Template tab.
  4. Under Deductions, check the employee’s pension contribution, and update if necessary.
  5. Under Benefits, check the employer’s pension contribution, and update if necessary.
  6. Click Save.
If a pay run is already in draft, you'll need to reset your employees' payslips to pull through these changes.

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