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When an Employee Changes Gender
When an employee tells you they have changed gender, you need to update your payroll records and notify HMRC. The process requires careful handling to protect your employee's confidentiality, and you must check whether their National Insurance contributions need to change based on their State...
When an employee tells you they have changed gender, you need to update your payroll records and notify HMRC. The process requires careful handling to protect your employee's confidentiality, and you must check whether their National Insurance contributions need to change based on their State Pension status.
Updating payroll records
Once your employee informs you they have changed gender, you can update your payroll records with their new gender and any changes to their title and name.
When your employee provides a copy of their new birth certificate, you should photocopy it for your records and return the original to them. At this point, check whether the change affects their National Insurance contributions.
Reporting changes to HMRC
You report payroll changes to HMRC through Full Payment Submissions (FPS) — the regular updates you send each time you pay your employees.
If you need to update both your employee's name and gender, you must report these changes in separate Full Payment Submissions. Do not submit them together in the same FPS. If you do, HMRC may create duplicate payroll records for your employee, which could result in your PAYE bill being higher than it should be.
Your employee must also tell HMRC directly about their name change.
Checking National Insurance contributions
The key question is whether the gender change affects your employee's State Pension age, as this determines whether they should pay National Insurance.
State Pension age varies between 61 and 68 depending on when someone was born and whether they are male or female. You can calculate your employee's State Pension age using HMRC's online calculator.
If your employee qualifies for State Pension after becoming female
Some employees may reach State Pension age after changing gender to female (since women historically had a lower State Pension age than men, though this is now equalising).
If your employee becomes entitled to claim State Pension after becoming female, you must update their payroll records so they stop paying National Insurance contributions.
If your employee stops qualifying for State Pension after becoming male
Conversely, an employee who becomes male may no longer qualify for State Pension if they had previously reached the State Pension age as female.
If this applies to your employee:
- Change their National Insurance category letter from 'C' to 'A'
- Start deducting National Insurance from their pay again
National Insurance category letter 'C' applies to employees over State Pension age, while category 'A' is the standard letter for most employees under State Pension age.
Employees paying reduced National Insurance
Until 1977, married women could choose to pay National Insurance at a reduced rate. Women who opted into this scheme before it ended can continue to pay the lower rate.
If an employee who has been paying reduced National Insurance becomes male, they lose eligibility for this concession. You must:
- Change their National Insurance category letter from 'B' to 'A'
- Calculate their National Insurance using category letter 'A' on all future payments
Category letter 'B' applies to married women paying reduced National Insurance contributions.
Confidentiality
An employee's gender change is highly personal information. Handle all updates to payroll records sensitively and maintain strict confidentiality. Only those who need to know for payroll purposes should be informed.
Keep the photocopy of your employee's new birth certificate securely with their other confidential personnel records.
Summary of action steps
When an employee tells you they have changed gender:
1. Update their gender, title, and name in your payroll records
2. Submit separate Full Payment Submissions for name and gender changes
3. Request a copy of their new birth certificate
4. Photocopy the certificate for your records and return the original
5. Check whether their State Pension status has changed
6. Update their National Insurance category letter if needed
7. Adjust National Insurance deductions accordingly
8. Remind your employee to inform HMRC of their name change directly
Sources
This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.
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