NI Employee and Employer has been calculated for 2020/21 but pay below the thresholds

Susie MTC · ‎February 11, 2022

NI Employee/Employer has been calculated on the wages, although the pay is below the threshold and the total for the year was £8788. The employee is a director and has been set up correctly. Can anyone explain/advise how this has happened through Standard Payroll and how best this can be rectified? There appeared to be no option for a final FPS, where this could be amended, and I am hoping we will not need to delete and re-run all the payroll for the tax year but we are looking to get a refund from HMRC, re monies overpaid.

Susie MTC · ‎April 01, 2022

Hi @Tom198... I did manage eventually to resolve it but it was a bit of a nightmare! When the client was originally set up for payroll he was supposed to be paid weekly, so was therefore set up as 'Alternative' method for Dirctor's NI Calculations, since the payments should have been regular. As it turned out with the pandemic, he wasn't paid regularly so some payments were above/some below the threshold. Unfortunately, after contacting QB, was told that the Director's NI Calculation can't be changed to Annual method once payroll has already been run, therefore all the pay runs for the year would need to be 'rolled-back' to the 6th April and re-run. In this case, this actually related to the previous year 2020/21 and since an Earlier Year Update can no longer be done, I had to resubmit all the payroll (and amended FPS) through HMRC Basic PAYE Tools. This did result in a refund for the overpaid tax. If you are in the current year, according to QB you would need to delete all the pay runs, which if it is monthly is not too bad (I had weekly to do :( ) and then you need to change the settings for the Director's NI to Annual, then re-run the payroll for the year, and submit the amended FPS. This should then correct the NI calculated to the annual amount over the year. It is a bit time consuming but hope that helps!

View solution in original post

LollyNino_C · ‎February 11, 2022

Hello there, @Susie MTC. Thank you for posting here in the Community,

The system calculates contributions and deductions depending on how you set them up. You must still pay tax and, in most cases, National Insurance if you get money from your job, such as annual bonuses.

You can use the HMRC calculator if the setup is proper but the calculation is not. You can add it as an earnings or additional pay type if you don't want the taxes to be calculated.

I'd also suggest reaching out to an accountant so they can help you verify your setup according to your payroll preferences. Feel free to use these articles that will help you identify pay types:

I'm always here if you have follow-up questions. Take care and have a wonderful day!

Susie MTC · ‎February 12, 2022

Hi @LollyNino_C

Thank you for your reply. The pay in this case is below both thresholds so no tax should be being calculated - I have also confirmed this with the HMRC Calculator and there are no bonuses! I do not need to contact an accountant as I am an accountant and this is my client, so I will contact the payroll helpline on Monday. Thank you, however, for your input.

Tom198 · ‎March 31, 2022

Hi

i have the same issue. It will be great if you can let me know how you resolve it so save my time to contact quickbook.

thanks

Tom

paul72 · ‎April 01, 2022

Hi @Susie MTC & @Tom198

I don't use QBO Payroll so this is just an educated guess but has the director been set to annual pay?

(is this actually possible on Standard Payroll? ... the Features in https://quickbooks.intuit.com/uk/payroll/advanced/ seems to suggest you need Advanced for annual pay)

If the payments have been made in 12 equal monthly payments, it shouldn't make a difference.

However, if the payments aren't uniform & some of them exceeded the monthly threshold of £737 then Employer NIC will have been deducted. If any exceeded £797 then Employee NIC will have been deducted.

Hope this helps.

Susie MTC · ‎April 01, 2022

Hi @Tom198... I did manage eventually to resolve it but it was a bit of a nightmare! When the client was originally set up for payroll he was supposed to be paid weekly, so was therefore set up as 'Alternative' method for Dirctor's NI Calculations, since the payments should have been regular. As it turned out with the pandemic, he wasn't paid regularly so some payments were above/some below the threshold. Unfortunately, after contacting QB, was told that the Director's NI Calculation can't be changed to Annual method once payroll has already been run, therefore all the pay runs for the year would need to be 'rolled-back' to the 6th April and re-run. In this case, this actually related to the previous year 2020/21 and since an Earlier Year Update can no longer be done, I had to resubmit all the payroll (and amended FPS) through HMRC Basic PAYE Tools. This did result in a refund for the overpaid tax. If you are in the current year, according to QB you would need to delete all the pay runs, which if it is monthly is not too bad (I had weekly to do :( ) and then you need to change the settings for the Director's NI to Annual, then re-run the payroll for the year, and submit the amended FPS. This should then correct the NI calculated to the annual amount over the year. It is a bit time consuming but hope that helps!

Susie MTC · ‎April 01, 2022

Hi @paul72... thank you for your reply. The Director was originally set to alternative as his payments were supposed to be made regularly but due to the pandemic this changed and it was not possible to change the method to annual during the tax year. It is however, an option in Standard Payroll, although I believe the advanced payroll might have been a bit more flexible in this regard. As it related to 2020/21, I had to resort to HMRC Basic PAYE tools to submit the amended FPS as there didn't appear to be a way to do this in QB (I have left feedback) and then submit a final FPS. Fortunately, it did generate the refund but it is a shame that you can no longer do an EYU, which would have been much quicker!

Thank you for your help :)

Topics

Training

Community

Resources

NI Employee and Employer has been calculated for 2020/21 but pay below the thresholds