Stopping Being an Employer

Introduction

If your business stops employing people, you must notify HMRC straight away and close your PAYE scheme properly. This involves submitting a final payroll return, paying any outstanding tax and National Insurance, and giving your employees their P45 forms on their last day.

Closing Your PAYE Scheme

When you permanently stop being an employer, you need to submit a final payroll return to HMRC. This will be either a Full Payment Submission (FPS) or an Employer Payment Summary (EPS) — these are the regular reports you've been sending to HMRC about employee pay and deductions.

What to Include in Your Final Submission

When making your final payroll submission, you must:

• Tick the 'Final submission because scheme ceased' box
• Enter the date you closed your PAYE scheme in the 'Date scheme ceased' box (this cannot be a future date)
• Deduct and pay any outstanding tax and National Insurance to HMRC within 17 days, or 14 days if you're paying by cheque

Other Steps You Need to Take

Beyond the final payroll submission, you also need to:

• Send your expenses and benefits returns to HMRC
• Enter a leaving date on each employee's payroll record
• Give each employee a P45 form on their last day of employment

Most payroll software can produce P45 forms automatically, or you can order them directly from HMRC if needed.

If You Have Employment Related Securities Schemes

If your business operates any Employment Related Securities (ERS) schemes — such as share option schemes or other employee share arrangements — you must separately notify HMRC that you're closing these schemes when you close your PAYE scheme.

If You Start Employing Again

If you start employing people again in the same tax year or the following tax year (for example, in 2025/26 or 2026/27), you don't need to register for PAYE again from scratch. You can simply reopen your existing PAYE scheme by sending a new FPS using your existing PAYE reference number.

Temporarily Stopping Employment

The rules are different if you only stop employing staff temporarily rather than permanently.

Seasonal Businesses

If you run a seasonal business or otherwise stop employing staff for less than a whole tax year, your PAYE scheme continues to run. You don't need to give your employees P45 forms if you're keeping them on your payroll during the quiet period.

What to Report During Inactive Periods

If you won't be paying staff for three months or more, you should indicate this on your last FPS before you stop paying them by putting 'Yes' in the 'Irregular payment pattern indicator' field.

You should also submit an EPS (Employer Payment Summary) to inform HMRC about months when you don't pay staff:

• For gaps in the current and last tax month, enter dates in the 'No payments due' fields
• For gaps you expect over the next 12 months, enter the relevant dates in the 'Period of inactivity' fields

This helps HMRC understand why they're not receiving regular payroll submissions from you and prevents unnecessary enquiries.

Business Mergers and Changes of Ownership

If you're stopping employment because your business is merging with another or changing ownership (rather than closing down), different rules apply. In these situations, the PAYE responsibilities may transfer to the new business owner, and the process for handling employee records and payroll differs from a standard closure.

Key Points to Remember

Closing your PAYE scheme properly is important to avoid penalties and ensure your employees receive the correct documentation. The main things to remember are:

• Notify HMRC immediately when you stop employing people
• Submit your final payroll return with the closure boxes ticked
• Pay any outstanding tax and National Insurance within the deadline
• Issue P45 forms to all employees on their last day
• Complete and submit any outstanding expenses and benefits returns

If you're unsure whether you're permanently closing or just pausing for a season, consider how long the gap will be. If it's less than a full tax year, treat it as a temporary pause rather than a full closure — this will save you administrative work if you start employing again soon.

Sources

• Stop being an employer
• Tell HMRC your employment related securities scheme has ended
• Payroll: what to do if your business merges or changes ownership

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.