PAYE Procedures – Why are there 53 paydays this year and how do we handle the payments?
Monday, July 26th, 2010
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A year has 365 days or, in a leap year, 366 days. That means that there are 52 whole weeks, plus an extra one or two days.
In a tax year that has 365 days, the first day and the last day fall on the same day of the week. If, say, the first payday falls on Friday, 6 April, the last payday will fall on Friday, 5 April, in the following year. There will be, in that tax year,
- 53 weekly paydays,
- 27 fortnightly paydays, and
- 14 four-weekly paydays.
In a tax year that has 366 days, the first two days and the last two days fall on the same days of the week. If, say, the first payday falls on Friday, 6 April or Saturday, 7 April, the last payday will fall on Friday, 4 April or Saturday, 5 April, in the following year. For either of those paydays, there will be, in that tax year,
- 53 weekly paydays,
- 27 fortnightly paydays, and
- 14 four-weekly paydays.
For determining in which tax week a payday falls, an employee’s payday is the earlier of
- the date on which the payment is actually made, and
- the date on which the employee is contractually entitled to be paid.
Example: If the contractual payday is Friday but employees are routinely given their wages on Thursday, the payday is Thursday.
Being specific therefore, there is a 53rd payday for employees paid weekly, a 27th payday for employees paid fortnightly, and a 14th payday for employees paid four-weekly if,
- in the 2010/11 tax year, the first payday is Tuesday, 6 April 2010 and the last payday is Tuesday, 5 April 2011.
- in the 2011/12 tax year (which has 366 days), the first payday is Wednesday, 6 April or Thursday, 7 April 2011 and the last payday is Wednesday, 4 April or Thursday, 5 April 2012.
- in the 2012/13 tax year, the first payday is Friday, 6 April 2012 and the last payday is Friday, 5 April 2013.
- in the 2013/14 tax year, the first payday is Saturday, 6 April 2013 and the last payday is Saturday, 5 April 2014.
The situation where there is an extra payday in the year occurs
- every 5 or 6 years for weekly-paid employees
- every 11 or 12 years for fortnightly-paid employees, and
- every 22 or 23 years for four-weekly-paid employees.
In a tax year with an additional payday, each employee’s free pay, as governed by the employee’s tax code, is applied over the usual number of paydays in the year, i.e. 52, 26 or 13 paydays. For the additional payment, the extra paydays are known, respectively, as Week 53, Week 54 and Week 56.
An extra amount of free pay is provided for the additional Week 53, Week 54 or Week 56 and, to achieve this, the tax for the payday is calculated non-cumulatively, i.e. as if it were week 1, week 2 or week 4, respectively. The effect is that, in that tax year,
- weekly-paid employees receive one extra week of free pay,
- fortnightly-paid employees receive two extra weeks of free pay, and
- four-weekly-paid employees receive four extra weeks of free pay.
In the case of employees with K codes, one, two or four weeks of additional pay are applied.
When completing forms P14 for employees after the end of a tax year with an extra payday, the employer enters “53”, “54” or “56”, as appropriate, in the section “Payment in Week 53”. The final tax code shown on the P14 should be the tax code used for the extra payday, e.g. 647LW1. The “W1” will, under standard year-end rules, be removed before processing the first pay of the new tax year.
The payroll department should correctly identify a week 53, week 54 or week 56 in advance of the tax year in which it will occur. Most payroll systems recognise the situation automatically; some require an indicator to be set so that the extra payday is calculated correctly. If the situation is not recognised in advance and employees are paid their first wages for the new tax year on the last day of the previous tax year, the employer’s tax office should be contacted immediately for guidance.
The problem of an extra payday never arises with employees who are paid monthly. There can only ever be 12 monthly payments in a tax year.
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Ken Holmes says:
February 16th, 2011
9:38 am
Not sure I understand completely the details on your website above of how you decide if there is a week 53 in any particular tax year, but if a payday is Friday, does that mean that there is a week 53 in the tax year 2010/11, please.
I would be grateful if you can confirm I am correct in assuming that there is a week 53 in the tax year 2010/11.
Thanks for your help.
Ian Congreave says:
February 16th, 2011
5:35 pm
Ken, there is a week 53 for an employer if that employer has 53 paydays in a particular tax year. In a tax year that does not have a leap-day (29 February), this happens only when the payday falls on 6 April. In 2010/11, 6 April 2010 was a Tuesday. If the first payday of the tax year was that Tuesday, the last payday of the tax year will also be on a Tuesday, i.e. Tuesday, 5 April 2011. Therefore, there are 53 Tuesday paydays in 2010/11.
So, there are always 53 paydays in a tax year, but they fall on a different day each year.
In 2011/12, which includes the leap-day 29 February 2012, the situation applies to paydays on two days. If the first payday of the tax year is Wednesday, 6 April 2011, or Thursday, 7 April 2011, there is a 53rd payday on Wednesday, 4 April 2012, and Thursday, 5 Arpil 2012.
It helps to look at a calendar to understand the week 53, 54 or 56 situation.
Lisa says:
March 10th, 2011
2:26 pm
In the tax year 2007/08 we managed to have 14 pay period of 4 weekly pay. The first pay period of the year was for the 4 wks ending approx 8/3/07 and wk 1 appeared on employees payslips as the pay period. The 14th pay period was for 4 wks ending 5/4/08 and showed wk 53 on the payslips. (the sage payroll operated calculated normal freepay) Therefore according to the P60/P14 not enough tax was deducted. The revenue have started to adjust some employees codes to collect this underpaid tax. However, reading your notes above, should they have been allowed the additional allowances?
Thank you
Ian Congreave says:
March 11th, 2011
9:28 am
Lisa: I’m having difficulties with the information you have provided. There is a week 56 (not 53) every 22 or 23 years with a four-weekly payroll, in a year when there are 14 paydays between 6 April in one year and 5 April (dates inclusive) in the tax year. In the 2007/08 tax year, that could only happen if the first payday of the year fell on Friday 6 April or Saturday 7 April (there were 366 days in that tax year). Now, 8/3/07 was a Thursday and clearly did not fall within the 2007/08 tax year. The 14th payday could certainly have fallen on 5/4/08, but that would have been a “week 56″, not a “week 53″.
A “week 56″ means that, in that particular situation, where there are 14 paydays in the year, employees have an extra 4 weeks of free pay, but only every 22 or 23 years. (Consistently, weekly-paid employees have a “week 53″ every 5 or 6 years so, roughtly speaking, all non-monthly employees get an extra week’s free pay every 5 or 6 years on average.)
So, if 2007/08 did, in fact, have 14 paydays within the tax year for your employees, they were entitled to the extra four weeks free pay. The P14 for all of those employees should have stated that they had a week 56. You need to argue that out with HMRC.
Lisa says:
March 11th, 2011
11:25 am
Hi Ian
Thank you very much for this information. The payslips should have shown week 56 and I need to talk to Sage about this. I will contact HMRC and try to explain this. Hopefully they will agree there was no underpayment of tax for employees in that tax year. I find it a bit strange they have only picked up on 1 employee out of 20, any ideas?
Ian Congreave says:
March 11th, 2011
5:52 pm
Lisa: I can only think that this employee’s P14 did not state that there was a week 56. In the absence of that note, it would appear that the tax was too low for the earnings.
John Livermore says:
June 29th, 2011
4:55 pm
We have a 4 weekly payroll (next year will be a week 56) so this year our week 52 which we submit P14′s and P35′s for ends on the 11th March with a week 4 generated for the 8th April.
If someone leaves in say, week 2 or 3 which is still March but our new tax year should they still get a P60 for the last tax year as they worked it all and a P45 up to week 4? I know the tax year ends 5th April but that essentially is our new tax period
Ian Congreave says:
June 30th, 2011
7:13 am
John: Just to clarify the week 56 situation. Are you talking about Friday 11 March 2011 as the final payday for 2010/11 and Friday 8 April as the first payday for 2011/12? If so, your final payday for 2011/12 will be Friday 9 March 2012, and the first payday of 2012/13 will be 6 April 2012. That means that you will have a week 56 for 2012/13 – first payday on 6 April 2012 and 14th payday on 5 April 2013.
Anyway, to your main question, the P60 rules are independent of paydays and pay periods, requiring you to issue a P60 only if the employee is still employed by you on the final day of the tax year and, as a result, there will be no further taxable pay for that tax year. So, if an employee leaves during March, in the pay period that will end on a payday in the following tax year, a P60 should not be issued. It is possible that the leaver will work for another employer during the last days or weeks of the tax year and receive further pay that is taxable in that tax year.
Lisa says:
July 7th, 2011
1:58 pm
We had some correspondence with you in March regarding wk 56. I have advised HMRC that the P14′s for 2007/08 should have shown wk 56 (not wk53) and an extra 4 weeks free pay should be allowed. I have spoken to various members of staff at HMRC to try and resolve this but have been unsuccessful. Their final word is that everything we have done is correct in the circumstances but they are only allowed to apply 12 months of freepay in any one year so they are also correct! In view of this, they are unable and unwilling to cancel the underpayment notice for the one staff member whose P14 this was actually picked up on. Apparently, if this had been self assessment they would have been able to allow the additional free pay but as it’s PAYE they can not. Is it worth appealing do you think?
Thanks
Ian Congreave says:
July 11th, 2011
12:07 pm
Lisa, I have not been able to identify the legislation that applies to “week 56″, if indeed there is any, and the only specific guidance is on page 14 of the current CWG2 booklet. As your other employees enjoyed the extra four weeks of tax free pay, it seems unreasonable that one particular employee should be singled out for different treatmnent because you made an error on one P14. Nothing would be lost by making an appeal. It would be worth stressing that it is very difficult for an employer to handle correctly a situation that only arises every 22 or 23 years!
geraldine says:
October 12th, 2011
11:01 am
We pay two weekly payrolls, one on a Thursday and one on a Friday.
I realise the Thursday payroll will be a week 53 in the 2011/12 tax year as thursday is 05/04/11. Is it ok to make the second weekly payroll, normally paid on a Friday a week 53, as due to the good friday bank holiday, we will be physcially making payment into their banks on Thursday 05/04/11.
Ian Congreave says:
October 14th, 2011
8:51 am
It is unusual for Good Friday to fall on 6 April but, as you say, that is a problem in 2012. This has happened before and, in the circumstances you describe, you are permitted to treat the 6 April 2012 payday as if it were a week 53 for the 2011/12 tax year. You will, of course, have to get your payroll system to treat it in that way and I suggest that you get the procedure clarified with your system provider.
Richard King says:
December 20th, 2011
9:09 pm
Hi Ian
Like Lisa above I am trying to get to the bottom of a week 56 payment & taxation rules in the 2007/08 tax year
we are paid 4 weekly and received 14 payments in the year above
ie 1st on 08 April 07 & last on 06 April 08
HMRC are saying that although the payroll system correctly gave allowances for the 14 payments and the correct tax was paid according to the guidance at the time, the employee still owes tax based on their pay in the year with standard 52 week allowances
When asked to explain this they say that although allowances are given for the week 56 payment, the employee is not actually entitled to them ( in effect they are just to stop a large tax payment in a single period) HMRC says they are entitled to claim back the extra allowance in subsequent years, and are doing so by adjusting 2011/12 codes for the relevant employee. again as in Lisa’s case they are appling this to 1 employee out of a dozen or so cases.
Are you able to shed any light on the ruling above and how would you suggest we follow this up?
Many thanks
Richard
Richard King says:
December 20th, 2011
10:20 pm
just realised dates quoted above were wrong
14th payment date was 04 april 2008 ( the company changed the pay date from Sunday to Friday )
Ian Holloway says:
December 21st, 2011
11:33 am
Hi,
I am coming into this fresh as Ian Congreave has decided to retire. He will be greatly missed as a font of all knowledge and a thoroughly nice gentleman.
I have been surprised by my findings when researching this topic. Richard has the main facts in his post, however, I can clarify this:
When a Week 53, 54, 56 situation occurs in a tax year, the correct thing is to allocate more tax free allowances on a Week 1 basis in the payroll. This is documented above and in HMRC guidance. Effectively, the employee gets more tax free allowances. Most software will also do this automatically.
However, when the employee is subject to ‘assessment’, the situation is different – see http://www.hmrc.gov.uk/manuals/eimanual/EIM42420.htm. I have taken the word ‘assessment’ to mean either HMRC assessing the employee’s tax affairs or the employee assessing themselves under Self Assessment (completing theur own tax returns). In the case of ‘assessment’, the employee is NOT entitled to the additional pay adjustment and allowances must be ‘made on a statutory basis’ – i.e. one year’s worth not one year + one week, two weeks etc. So, for these ‘assessment’ employees, they will have received too much pay adjustment, probably underpaid tax and HMRC are entitled to claim this back from them. One such way would be through an adjustment to the employee’s tax code.
I must admit that I was not aware of this – that there was a difference between a Week 53 for a PAYE employee and a Week 53 for an assessment employee. It does seem very strange, however, this is what HMRC have documented happens.
I am going to query this with HMRC. With a Leap Year and Good Friday on 06 April in 2012, the possibilities of a Week 53 are high next year, so let’s try and get some guidance as to why there is different treatment.
That’s all I have for the moment but I will feed back when I have a response from HMRC.
Kind regards,
Ian
Ian Holloway
The Learn Centre
Dana Collins says:
January 11th, 2012
3:59 pm
Our employees are weekly paid. I process the wages on a Wedesday and it enters their bank accounts on a Friday – although the week ends on a Saturday and therefore the payslips have the Saturday dates on. We also pay one week in arrears.
Will I have a week 53 pay period in the tax year 2012 – 2013?
Thanks
Sarah Henderson says:
February 3rd, 2012
12:51 pm
Hi, I am wondering if you have any further info on the week 53 and Good Friday Scenario??
We process a weekly payroll and the pay day is Friday 6th April, which will be moved to Thursday 5th due to bank holiday, next year it will be pay day on Friday 5th April. I have been advised that in 2007 there was an agreement made with the HMRC called a Good Friday agreement which would mean we didnt have to have a week 53, I cannot seem to find anything about this, The reason for not wanting to have a week 53 is we also have a 4 weekly payroll and they are all alligned having a week 53 would knock this out… any help is appreciated!
fernb says:
February 3rd, 2012
3:36 pm
Hi Dana,
I hope the following assists you with your query..
6th April 2012 falls on Good Friday
Therefore if payday for weekly payroll usually Friday but brought forward to previous working day in theory it is week 53, and
The next payday would be week 2
HMRC guidance treat payment as if made on normal payday
However if weekly payroll normally paid on Thursday 5 April this is week 53.
Regards
Fern
fernb says:
February 3rd, 2012
3:37 pm
Hi Sarah,
I hope the following assists you with your query..
6th April 2012 falls on Good Friday
Therefore if payday for weekly payroll usually Friday but brought forward to previous working day in theory it is week 53, and
The next payday would be week 2
HMRC guidance treat payment as if made on normal payday
However if weekly payroll normally paid on Thursday 5 April this is week 53.
Regards
Fern