If you pay your employees weekly, fortnightly or every four weeks, rather than every calendar month, you may need to make a ‘week 53’ payment in your final full payment submission of the year.
Due to the dates in this current financial year, there could be 53 processes for weekly paid employees, 14 processes if employees are paid every four weeks, and 27 processes if employees are paid fortnightly - depending on when their normal pay date is.
For the 2023/24 tax year, there are two tax days in tax week 53, Thursday 4 April and Friday 5 April.
If the following applies:
These are the only scenarios where a week 53 should be processed - the next processing date for all other pay dates falls into the 2024/25 tax year.
Because the annual personal allowance has already been ‘used up’ by week 52, strictly speaking, employees are not actually entitled to any more tax-free pay in that year. However, if no tax-free pay is allocated in week 53, then tax would be calculated on all of an employee’s earnings resulting in less take-home pay than usual.
Tax
To comply with government legislation, tax is calculated using a week one/month one free-pay allowance. This ignores previous pay and tax, calculated on a non-cumulative basis. Non-cumulative means that the employee’s year-to-date figures aren’t included in the tax calculation. Instead, at week 53, tax is calculated as if it’s the first pay run of the tax year.
This protects the level of take-home pay that the employee receives.
National Insurance
For employees, national insurance (NI) is calculated as in any other pay period, using the weekly, two-weekly or four-weekly thresholds, as appropriate.
For directors using the table method, 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 year-to-date method, their NI for week 53 is calculated cumulatively as in any other pay period.
Because the employee has received extra tax-free pay in one year, HMRC will offset this by reducing the amount of tax-free pay they receive in the following year. Typically, HMRC achieve this by adjusting the tax code of the employee. In such cases, HMRC will contact both the employee and the employer to advise them of the tax code change.
HMRC may issue a P800 form to any employee who owes tax following a ‘week 53’ payment, which explains how their tax has been calculated. Further information can be found here.
If you need advice regarding week 53 payments or have any other payroll concerns, please contact us.
