To be eligible for an annual scheme, you must meet all of the following requirements:

• You pay all of your employees annually
• You pay all of your employees within the same, single tax month
• You are only required to pay HMRC annually

If your scheme isn't registered as an annual scheme and you have a mixture of pay frequencies in your PAYE scheme, you need to follow a different process.

The Annual Pay Frequency is only available in your software if you have a subscription to Sage 50 Payroll Professional.  If you don't have the option, you should contact technical support for further assistance.

Register your annual licence scheme with HMRC

Before you can process an annual pay scheme in Sage 50 Payroll, register your PAYE scheme with HMRC as an annual scheme and let them know which tax month that you'll be paying your employees. You need your 13-character Accounts Office reference when you contact them.

Set your employees pay frequency as annual

If your employee is already set up on another company, you need to process them as a leaver in the original company then create a new employee in the new PAYE scheme, selecting Annually in the Payment Frequency list.

As an annual pay frequency is only applicable to PAYE schemes where all of the employees are paid annually, the following warning appears, if you have multiple pay frequencies, when you assign an annual pay frequency to an employee:

'Annual pay frequency is only valid in schemes that HMRC recognise as an annual scheme.
There are employees in this company that have an alternative pay frequency'

Employer payment summaries

Once you're registered as an annual scheme, an employer payment summary (EPS) isn't required for the 11 months of the tax year where no payments are made to your employees.

If you don't run an annual scheme, you need to submit a NIL EPS for every month that you aren't paying your employees. If you're changing to an annual scheme part-way through a tax year, you need to submit a NIL EPS for every month until your registration is accepted.

Change the date you pay your employees

When you register as an annual scheme, you notify HMRC of the tax month that you're paying your employees. If you need to change the month that you pay you employees, you need to submit a full payment submission (FPS) for the new period that you're paying the employees. If you're changing the payment date to a date later than the original payment date, you need to submit a NIL EPS for the original payment month to let HMRC know that you aren't paying anyone.

Process payroll annually

When you process an annual pay frequency, you need to consider the following:

Tax and national insurance

Regardless of the cumulative status of the employee's tax code and the month they're being paid in, when the employee is paid annually the tax calculation uses the full annual free pay allowance. The calculation uses tax month 12's tables.

National insurance contributions (NICs) calculate on an annual basis. To check the figure that Sage 50 Payroll calculates, you need to calculate the NIable pay using the annual rates and thresholds for the employee's NI category.

The Director's NIC tab in the year to date (YTD) section of the employee record isn't available when their pay frequency is set to annual. This is because if they are paid once per year, the NI must be calculated on an annual basis with either NI calculated as an employee or director for the full year:

• If the individual is a director as of their annual pay date, their NI is calculated as a director for the year
• If they become a director after the annual pay date for a tax year, their NI is calculated as an employee

Student / Postgraduate loans

To deduct student and postgraduate loans, the calculation is based on the annual threshold.

Statutory payments

You can record periods of absences for your record but no statutory payments are calculated on an annual pay frequency.  These would have to be processed manually.

Attachment of earnings

Attachment of earnings are applicable to annual payments and you can set up and process them as normal.

Full payment submissions

You can submit a full payment submission (FPS) and FPS adjustment as normal for employees with an annual pay frequency. These submissions include an indicator of MA for this pay frequency.

Automatic enrolment

An annual pay frequency doesn't affect your automatic enrolment duties. The annual thresholds are used to calculate pension contributions. Employees who have an annual pay frequency aren't included in any of the tasks within the Pensions Module. Any employees/non-directors who are annually paid need to be enrolled into the pension scheme manually via the employee record if applicable.

Online services

You can upload annually paid employees to the online payslips and documents services.