Correct PAYE errors

Payroll errors happen. Whether you have used the wrong tax code, miscalculated pay, or submitted incorrect information to HMRC, this guide explains how to put things right.

Types of PAYE errors

• Wrong tax code used - employee over or under-taxed
• Incorrect pay reported - wrong gross or net pay on FPS
• Missing employee - employee not included on FPS
• Wrong NI category - incorrect National Insurance calculated
• Duplicate submission - same employee reported twice
• Wrong payment date - FPS shows incorrect payday

Correcting errors in the current tax year

For errors discovered in the current tax year:

1. Correct your payroll records - update employee file with correct information
2. Submit corrected FPS - include year-to-date corrected figures
3. Within 14 days - corrections within 14 days of month end counted in that month
4. Late reporting reason - select appropriate reason code (for example, H - Correction to earlier submission)

Correcting previous tax years

For tax years 2020 to 2021 onwards, submit a further Full Payment Submission (FPS) with corrected year-to-date figures for the previous year.

Note - The Earlier Year Update (EYU) is no longer used for corrections from 2020 to 2021 onwards.

Employee refunds and underpayments

If employee overpaid tax:

• Refund through payroll in next pay period
• Or employee can claim directly from HMRC after tax year end

If employee underpaid tax:

• Collect underpayment through future pay (with employee agreement)
• HMRC may adjust their tax code to collect
• Maximum collection through code change: £3,000 per year