1. Tax Week 53/54/56

This section describes how tax and NI are calculated at week 53, 54 or 56 in axis payroll, and why HMRC may send a form P800.

When you process a week 53 for weekly payroll, week 54 for fortnightly payroll or week 56 for four-weekly payroll for the last payroll period of the tax year, there's nothing that you need to do differently. axis payroll automatically completes the correct calculations for pay dates requiring this calculation.

In line with HMRC requirements, axis payroll calculates tax using a week 1 / month 1 free pay allowance in week 53, 54 or 56. This ignores previous pay and tax and calculates on a non-cumulative basis. This means that the tax calculation doesn't use employees' year to date figures.

You don't need to amend the employees' tax codes to process week 53, 54 or 56. Your software automatically applies HMRC's rules and calculates tax correctly.

 Note: Employees' tax only calculates on a week 1/month 1 basis if they have earnt above their annual free pay allowance at week 52. If they don't earn over the annual free pay allowance threshold in week 53, there's no tax to deduct.

NI calculates as in any other pay period for employees, using the weekly, two weekly or four weekly thresholds, as appropriate.

For directors with NI calculated on the 'On account' basis, their NI recalculates in week 52 cumulatively using the annual thresholds. It then calculates cumulatively again in week 53 still using the annual thresholds.

For directors that use the Annual basis, their NI for week 53 calculates cumulatively as in any other pay period.

A P800 is a notice of under or overpaid tax in the year. Week 53 normally generates a P800 notice because employees receive 53 weeks of tax free allowance, instead of 52 weeks.

Weekly paid employees receive a tax-free allowance for the tax year based on their tax code, divided over 52 weeks. This means the employees receive all of their allowance week 52 has been processed. When you process week 53, the week 1 / month 1 calculation means they receive an extra week of tax allowance. 

HMRC then recalculate 53 weeks of earnings against 52 weeks of annual allowance. HMRC normally claims this back through a tax code adjustment in the new tax year, notified on form P800. Alternatively, the employee can settle this balance directly with HMRC.