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Tax Refunds and Tax Funding

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Summary

This guide will provide information on where money for paying tax rebates to employees comes from, and how this appears in Sage 50cloud Payroll.

Description

When the new tax year begins on 6 April 2022, Sage Instant Payroll will no longer be compliant and support will end. Don't worry though, we've got you covered. Find out more >

When you process pay for your employees, sometimes they might receive a refund on tax. This can happen for several reasons, particularly if they had paid too much in an earlier period since tax calculates cumulatively. 

Resolution

Tax Refunds and the P32

Normally when you process your payroll, any tax refunds are accounted for on your P32. Any tax refunds will reduce the amount of tax due to HMRC on the P32, and therefore reduce your liability for that month. 

For example:

Employee 1 has paid £100 in tax this month.

Employee 2 has received a tax refund of £20 this month.

The tax on the P32 will show a tax liability of £80 for that period. 

Tax Funding

In some cases, you may find that you are unable to pay employees their tax refunds. This could be if you have a large number of tax refunds to pay at once, or if the amount of the refund is very high. 

If so, you might be eligible to claim tax funding from HMRC. Read more > 

If you are eligible for tax funding from HMRC, you can enter the amounts of the tax funding received in Sage 50cloud Payroll. 

  1. Click Company, then Settings
  2. Click Tax Funding
  3. Enter the values for any funding received against the relevant months. 
  4. Click OK.

When you run the P32, the values for any tax funding entered appear at the bottom of the report. This value should then be added back onto the value to pay to HMRC.


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Manage your employees’ taxable benefits easily and accurately, with online submissions to HMRC. Deadline for P11D submission is July 6 2022.

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