New Tax Year preparation: payroll software updates 2023/24

As the tax year end approaches, providers will be releasing software updates – what do you need to do?

Payroll software updates 2023/24

As the end of the tax year approaches, payroll software providers will be releasing updates ready for the new tax year. In most cases, any changes to the payroll software are notified in advance to allow time for users to reconfigure and test their processes and controls and to train users. The responsibility for correctly implementing changes ultimately lies with the employer, so it is imperative that sufficient time is allowed to ensure ongoing compliance with payroll obligations.

What should payroll teams do now?

In addition to the usual legislative updates, the 2023/24 tax year will see a significant increase in the National Minimum Wage (NMW) pay rates. In planning for the 10 percent increase, many employers reviewed pay structures to maximise NMW pay to reduce the risk of non-compliance, and to ensure that workers continued to benefit from salary sacrifice savings.

In many cases the buffer between actual pay and NMW will be eroded for low paid workers, and it is therefore important to thoroughly test the NMW controls well in advance of the new tax year. The controls will vary according to NMW worker type (salaried, timed, output, and unmeasured) and rigorous testing must be undertaken to ensure that they are properly updated and thoroughly tested in advance of 6 April 2024.

In addition to NMW, the testing programme should cover all aspects of the payroll process to ensure withholding and reporting it is not disrupted by the software update.  This will include for example:

  • Sample payslip reviews to confirm all withholdings (e.g. PAYE, NIC, pension contributions) are calculated correctly;
  • Employee tax codes – confirmation of new codes that apply at the start of the tax year (e.g. reverting to a cumulative code with the appropriate point uplift unless a P9 has been received); and
  • Reporting into finance systems and other reports (e.g. pension providers).

Working with other key stakeholders, the payroll team should plan the testing programme so that processes and controls, process maps and guides are properly updated and reviewed to support ongoing compliance and Senior Accounting Officer reporting.

How can KPMG help?

KPMG has extensive experience supporting clients to prepare for payroll year end.  The team includes payroll specialists and ex HMRC NMW officers who would be happy to have a call to discuss how they can help you.