PAYE Compliance UK | HMRC Payroll Rules Explained

Reviewed: 17 June 2026

PAYE (Pay As You Earn) is the system UK employers use to deduct Income Tax and National Insurance from employee pay and report payroll information to HM Revenue & Customs (HMRC). Employers remain responsible for accurate calculations, timely Real Time Information submissions and payment of amounts due, even where payroll software or an external provider is used.

2026/27 PAYE figures at a glance

The standard Personal Allowance remains £12,570, although an employee’s tax code and personal circumstances determine the allowance actually used through payroll.
The employer National Insurance secondary threshold is £5,000 a year.
The main employer National Insurance rate is 15% above the relevant threshold.
From 1 April 2026, the National Living Wage for workers aged 21 and over is £12.71 an hour. The rate is £10.85 for ages 18 to 20 and £8.00 for under-18s and qualifying apprentices.

Rates and thresholds can change between tax years. Check the current HMRC employer rates and thresholds and National Minimum Wage rates before processing payroll.

When PAYE applies

A business will usually need to register as an employer and operate PAYE when it employs staff, pays directors or employees, provides certain taxable benefits, or makes payments that must be reported through payroll. Registration should be completed before the first payday, allowing enough time to receive the employer PAYE reference and configure payroll correctly.

The official starting point is PAYE and payroll for employers.

Core payroll responsibilities

Maintain accurate employee details, tax codes and starter information.
Calculate gross pay, Income Tax, employee National Insurance, employer National Insurance and other deductions.
Apply statutory payments, pension deductions and student-loan deductions where relevant.
Give employees an itemised payslip on or before payday.
Submit payroll information to HMRC and pay liabilities by the applicable deadline.
Keep evidence supporting calculations, corrections and submissions.

Real Time Information submissions

Most employers report each payroll through Real Time Information. A Full Payment Submission (FPS) is normally sent on or before the employee’s payday. An Employer Payment Summary (EPS) may also be required when reclaiming statutory payments, reporting no payments in a tax month or making certain adjustments.

HMRC explains the submission process in reporting payroll information to HMRC.

PAYE payment deadlines

PAYE and National Insurance are normally due by the 22nd of the following tax month when paying electronically, or by the 19th when paying by post. Employers permitted to pay quarterly follow the relevant quarterly deadlines. Late payments may attract interest and penalties.

Use the current PAYE payment guidance to confirm how much is due and when to pay.

Payroll records

Payroll records should normally be kept for at least three years from the end of the tax year they relate to. Records typically include employee pay and deductions, tax-code notices, taxable benefits, statutory payments, hours where relevant to minimum-wage compliance, and copies or confirmations of submissions to HMRC.

See HMRC payroll record-keeping requirements.

Common PAYE mistakes

Registering as an employer too late.
Submitting the FPS after payday without a valid late-reporting reason.
Using an incorrect starter declaration or tax code.
Failing to update pay, benefits, pension or statutory-payment information.
Paying HMRC late or relying on an outdated amount.
Assuming payroll software or an outsourced provider transfers legal responsibility away from the employer.

How PAYE fits with the rest of the site

For the wider compliance framework, visit the UK Tax Compliance hub. For practical payroll workflows, see Payroll Processing Services UK and Payroll Software Explained for UK Employers.

This page provides general educational information, not personalised tax, payroll, employment or legal advice.

Run PAYE as a controlled monthly process

PAYE compliance starts before payroll is calculated. Accurate results depend on approved employee changes, starter and leaver information, tax codes, pay elements, benefits, pension data and payroll cut-off controls. The employer remains responsible for correct reporting and payment even when payroll is outsourced.

Register and set up the payroll correctly

An employer normally needs to register with HMRC before the first payday and obtain the PAYE and Accounts Office references used in payroll software and payments. The payroll calendar should show paydays, cut-off dates, approval dates, FPS and EPS deadlines, payment dates and year-end tasks.

Set user permissions so that the person entering changes is not the only person approving the final payroll where practical. Record who can amend bank details, tax codes, pay rates and one-off payments.

Starter information

Collect the employee’s full name, address, date of birth, National Insurance number where available, start date, pay details and starter declaration. Use the P45 information where provided and keep evidence of the declaration used. Missing or inaccurate starter information can affect the tax code and create corrections later.

Check whether the worker is an employee for payroll purposes rather than assuming the label in a contract determines status. Employment-status and off-payroll questions can require specialist review.

Use a tax-year payroll calendar

Map every payday to the tax month, FPS date, HMRC payment date, pension deadline and internal approval date. Add year-end milestones and dates for P60s, benefits and software updates. The calendar should also show who covers each role during leave. Review it whenever the regular payday changes because an apparently small operational change can affect reporting.

Monthly payroll input checklist

New starters, leavers and changes of address or bank details.
Approved salary, hours, overtime, bonus and commission data.
Statutory pay, leave and absence information.
Pension contributions and enrolment changes.
Benefits or expenses processed through payroll.
Attachments of earnings and other deductions.
Tax-code and student-loan notices.
Director payroll decisions and annual or irregular pay patterns.

Use a documented cut-off. Changes received after approval should follow an exception process rather than being inserted informally.

Calculate and review gross-to-net pay

Payroll software calculates PAYE and National Insurance from the data and rules provided, but the results still need review. Compare total gross pay, tax, employee and employer National Insurance, pension deductions, statutory pay and net pay with the prior period and the approved input file.

Investigate unusual results such as negative net pay, large tax refunds, employees with no deductions, duplicated bonuses, unexpected National Insurance movements or significant changes in employer cost.

Full Payment Submission

Use payroll software to send a Full Payment Submission to HMRC on or before the employee’s payday. The FPS reports payments and deductions and should include everyone paid, even where pay is low. Enter the normal contractual payday even where staff are paid earlier because of a weekend or bank holiday.

Do not submit too early without a process for subsequent changes. If an employee leaves, a tax code changes or pay is corrected after an early submission, a corrected FPS may be needed.

Employer Payment Summary

An EPS may be required for matters such as statutory-payment recovery, certain allowances or a period in which no employees were paid. HMRC uses FPS and EPS information to calculate the employer’s expected liability. Submit the relevant information by the applicable deadline and reconcile it to the payroll records.

Paying HMRC

The amount due should be reconciled to the payroll reports, FPS and EPS information and the HMRC account. The normal electronic payment deadline is generally the 22nd of the following tax month, while different deadlines can apply to other methods or quarterly payers. Confirm the actual payment date and reference, and allow time for cleared funds to reach HMRC.

Do not assume the direct-debit or bank payment proves the payroll submission was correct. Filing and payment are separate controls.

2026–27 rates and thresholds

For 2026–27, the main employer National Insurance rate is 15%, and the annual secondary threshold is £5,000. The Personal Allowance remains £12,570. National Minimum Wage and statutory-payment rates also change over time. Payroll software should be updated for the correct tax year, but the employer should still verify that the version and effective dates are correct.

Employee records and retention

Keep the records used to calculate pay and deductions, including starter information, tax-code notices, hours, pay rates, statutory-pay evidence, pension data, benefits, deductions and approvals. Access should be limited because payroll contains sensitive personal and financial information. Record changes to master data and retain an audit trail showing who made and approved them.

Payroll reports should agree to the accounting records. Reconcile gross pay, employer costs, net-pay clearing, pension deductions and the HMRC liability. Unreconciled balances can hide duplicate payments, omitted deductions or posting errors.

Payment security and business continuity

Payroll is a common target for fraud because bank-detail changes and payment files are time-sensitive. Verify bank changes independently using trusted contact information, restrict access to payment files and require a separate approval before release. Do not accept an emailed bank change as sufficient evidence on its own.

Maintain a continuity plan for staff absence, software failure and missed cut-offs. It should identify backup approvers, access credentials, provider contacts, manual controls and the process for correcting a late or incomplete submission.

Corrections

When a payroll error is found, identify the employee, period, original result, corrected result, cause and effect on pay and HMRC reporting. Follow the appropriate correction process for the tax year and preserve both the original and corrected reports. Communicate clearly with affected employees and check whether pension, benefits or accounting entries also need adjustment.

Leavers and final pay

Record the leaving date, final pay, holiday pay, deductions and P45 information correctly. Remove system access and recurring pay elements. A leaver paid after the leaving date can require particular payroll treatment, so do not simply reactivate an old record without review.

Year-end responsibilities

Submit the final payroll reports for the tax year.
Provide employees with P60s by the required date.
Review benefits, expenses and any P11D or P11D(b) obligations.
Reconcile payroll control accounts and HMRC balances.
Update software and rates before the first payroll of the new tax year.
Archive reports, submissions, approvals and employee records securely.

Benefits and payrolling

Benefits can create separate reporting and Class 1A National Insurance obligations. From 6 April 2026, the HMRC service changed: only benefits registered before that date can currently be payrolled through the service, while accommodation and beneficial loans cannot be payrolled. Check the current guidance before changing a benefit-reporting method.

Outsourced payroll controls

Agree who owns employee data, cut-off dates, approvals, submissions, HMRC payments, pension uploads and corrections. The provider should supply payroll summaries, exception reports, submission confirmations and a clear liability figure. The employer should approve the payroll before payment and retain access to its records.

Monthly sign-off

Confirm all authorised changes have been received.
Run payroll and review gross-to-net and employer-cost movements.
Approve the payment file separately from the payroll calculation.
Submit the FPS and any EPS.
Reconcile the HMRC liability and arrange payment.
Post payroll journals and reconcile control accounts.
Save reports, approvals and receipts.

Common mistakes

Submitting the FPS after payday without a valid exception.
Using incomplete starter information.
Changing bank details without independent verification.
Failing to reconcile payroll, pension and HMRC balances.
Assuming outsourcing transfers legal responsibility.
Missing benefits or year-end reporting.
Applying new tax-year rates to the wrong pay period.

Official guidance

Related ASH guides

Important: PAYE, employment status, benefits and payroll corrections can depend on detailed facts. Use current HMRC guidance and qualified advice where needed.