At a glance
- Run the last payroll and send the FPS
- Record a leaving date for every employee
- Give each employee a P45 on their last day
- Mark the final FPS or EPS as scheme ceased
- Pay outstanding tax and National Insurance within 17 days
- Send any expenses and benefits returns
In more detail
Before that, you pay everyone for the last time, record a leaving date for each employee and give them a P45. GOV.UK says you should tell HMRC straight away if your business stops employing people.
Below are the steps, including for a director-only company that has stopped paying a salary, and when to keep the scheme open instead.
You can also get your PAYE scheme closure checked by SimpleFilings.
Close the scheme or keep it open?
Close a PAYE scheme only when the company has stopped employing people for good, or for at least a whole tax year, which runs from 6 April to 5 April. If you will pay anyone again within the tax year, GOV.UK says the scheme keeps running and you report the months with no pay instead.
GOV.UK gives a seasonal business as an example of a scheme that stays open. You tell HMRC about the months when you pay nobody.
This applies to a director-only company too. If the director has stopped taking a salary but may take one again within the tax year, keeping the scheme open is usually simpler. If no salary will be paid again, or the company is being closed down, close the scheme. If the company is becoming dormant, GOV.UK says to close the scheme if you do not plan to restart trading in the current tax year.
Source: Stop being an employer
How to close a PAYE scheme: step by step
Work through these steps in order. The final report must come from your payroll software or payroll provider.
- Run the last payroll. Pay everyone their final wages and send the Full Payment Submission (FPS) on or before payday, as you normally would.
- Record a leaving date for every employee. This includes a director paid through payroll. On a final report, HMRC needs the 'Date of leaving' for all your employees.
- Hand every employee their P45 on their last day. Your payroll software will usually create it, or you can order P45s from HMRC.
- Mark the final report as ceased. Your last return can be an FPS or an Employer Payment Summary (EPS). Put 'Yes' in the 'Ceased indicator', also shown as 'Final submission because scheme ceased'. Enter the 'Date scheme ceased'. It cannot be a future date and must be in the same tax year as the final submission. Do not also fill in 'Final submission for year'.
- Pay what is still owed. Deduct and pay any outstanding tax and National Insurance to HMRC within 17 days, or 14 days if you pay by cheque.
- Finish the loose ends. Send any expenses and benefits returns that are due. If the company has Employment Related Securities (ERS) schemes, tell HMRC you are closing those as well.
Source: Stop being an employer
Final FPS or final EPS?
Use a final FPS to close a PAYE scheme if you are paying people in the last period, and mark it as ceased while reporting the final pay. Use a final EPS if the last pay has already been reported and nothing more is due. Either way, the final report carries the ceased indicator and the date the scheme ceased.
| Field | What to enter |
|---|---|
| Ceased indicator | Yes |
| Date scheme ceased | The date you stopped employing people. Not a future date, and in the same tax year as the submission |
| Date of leaving | A date for every employee, including paid directors |
| Final submission for year | Leave blank when you use the ceased indicator |
A final EPS often suits a director-only company whose last salary was paid earlier in the same tax year.
If you are only pausing pay: tell HMRC instead of closing
If you will pay staff again within the tax year, keep the scheme open. You do not need to give P45s to people you keep on the payroll.
If there will be a gap of 3 months or more before anyone is paid again, set the 'Irregular payment pattern indicator' to 'Yes' on the final FPS before the gap starts.
For a month that has passed with no pay, send an EPS by the 19th after that tax month. Put 'Yes' in 'No payment for period', with the 6th of the first month and the 5th of the last month with no pay. Do not send an FPS for those months.
You can also tell HMRC in advance. Use the 'Period of inactivity' fields on an EPS to cover at least 1 month and up to 12 months. The period can only start from the beginning of the next tax month.
A short EPS for each gap keeps HMRC's record in line with what you actually paid.
P45s and payments after someone leaves
You must give an employee a P45 when they leave. Record their leaving date in payroll when you make the final payment.
If you pay them something after they have left, report it on your next FPS using their original leaving date and payroll ID, and use tax code 0T on a week 1 or month 1 basis. You must not give them another P45. Where you can, make any last payments before the final ceased submission.
If you make the final payment before 6 April but the person leaves after that date, do not put the leaving date on the same FPS. Include them on your first FPS of the new tax year instead, as GOV.UK explains.
Close the PAYE scheme before you close the company
If you are winding the company up, deal with payroll first. Close the PAYE scheme, pay HMRC what is owed and send any outstanding returns before you apply to strike the company off. HMRC is a creditor, and the company should not be closed with payroll tax still owed.
Payroll is only one part of closing a company. VAT, Corporation Tax, the bank account and Companies House filings all need dealing with too. See how to close a limited company for the full order, and how to deregister for VAT for the VAT side.
If you start employing anyone again in the same or the next tax year, you do not register a new scheme. GOV.UK says you reopen the old one by sending an FPS with your PAYE reference.
Source: Stop being an employer
Common mistakes when closing a PAYE scheme
Treating a normal final payroll run as closure. A last payday does not close the scheme unless the report is marked as ceased with the date.
Entering a future cessation date. HMRC does not accept one. Send the final report once you have actually stopped employing people.
Closing the scheme when pay is only paused. If you will pay someone again within the tax year, report the gap on an EPS instead.
Forgetting the director. A director paid through payroll is an employee for PAYE and needs a leaving date too.
Leaving tax unpaid or skipping the expenses and benefits returns, then trying to close the company.
Source: Stop being an employer
Get help closing your PAYE scheme
SimpleFilings can review what your company still needs to do to close its PAYE scheme for a £4.99 service fee. We check whether the final FPS or EPS was marked as ceased, and we tell you about any steps still outstanding. We do not run or correct payroll, issue P45s, prepare expenses and benefits returns or pay tax for you. The final submission must come from your payroll software or payroll provider.
Frequently asked questions
How do I close a PAYE scheme?
Send a final FPS or EPS with the 'Final submission because scheme ceased' box (the ceased indicator) set to Yes and the date the scheme ceased. Give employees a leaving date and a P45, pay any outstanding tax and National Insurance, and send any expenses and benefits returns.
Do I need to close PAYE if my director stops taking a salary?
Not if the break is shorter than a whole tax year. The scheme keeps running and you send an EPS for the months with no pay. If the director will not be paid again, or the company is closing, close the scheme.
How do I tell HMRC I am not paying anyone this month?
Send an EPS by the 19th after the tax month with 'No payment for period' set to Yes and the dates of the months with no pay. You can also use 'Period of inactivity' to tell HMRC in advance for 1 to 12 months.
Can I put a future date as the date the scheme ceased?
No. GOV.UK says you cannot put a date in the future. The date must also be in the same tax year as the final submission.
When do I pay the last PAYE bill?
GOV.UK says to pay any outstanding tax and National Insurance within 17 days, or 14 days if you pay by cheque.
Can I reopen a closed PAYE scheme?
Yes. GOV.UK says that if you take on staff again in the same tax year or the next one, you reopen it by sending an FPS that uses your PAYE reference.
Official sources
4
- Stop being an employer
- What payroll information to report to HMRC
- What to do when an employee leaves
- Dormant companies: dormant for Corporation Tax
Written and checked by SimpleFilings against these official pages. Last checked . SimpleFilings is operated by ONAF Limited (company number 12589383), an independent firm, not part of Companies House, HMRC or the government.