UK Employer Payroll Notes

Calculating holiday pay for staff with fixed hours is easy: a week's pay for a week's holiday. For irregular-hours workers and part-year workers, it has been a legal saga. Since January 2024, the rules are clearer, and the 12.07 percent method is back on solid ground. Here is how it works in practice. Where the 12.07% comes from Full-time workers get 5.6 weeks of statutory holiday a year. That means for every 46.4 weeks worked, 5.6 weeks are holiday: 5.6 divided by 46.4 is 12.07 percent. So an irregular-hours worker accrues holiday at 12.07 percent of hours worked in each pay period. Work 20 hours this week, accrue 2.41 hours of holiday. Simple, proportional, and now explicitly lawful. Rolled-up holiday pay is back The 2024 regulations also re-legalised rolled-up holiday pay for irregular-hours and part-year workers: you can pay the 12.07 percent as an uplift on each payslip instead of paying it when holiday is taken. Two conditions: it must be calculated at the correct rat...

P45, P60 and P11D: the employer year-end documents explained   Three forms, three different moments Employers deal with three similarly named HMRC forms, and mixing them up causes real problems: P60s handed out like P45s, P11Ds forgotten entirely, Class 1A National Insurance paid late. Each form belongs to a different moment in the employment story. Get the timing and the purpose straight, and payroll year-end becomes routine. P45: when an employee leaves The P45 is the leaving form. When an employment ends, the employer must produce a P45 without unreasonable delay, normally on the final payday. It comes in four parts with distinct destinations: Part 1 goes to HMRC. Parts 1A, 2 and 3 go to the employee. Part 1A is for the employee's own records, while Parts 2 and 3 go to the new employer or to Jobcentre Plus, so the next payer can put the employee on the right tax code. The P45 shows total pay and tax deducted in that employment up to the leaving date, plus the tax code in...

  If you employ staff in the UK, you know the P11D ritual all too well: listing every staff benefit, working out the taxable value of each one, and hoping you have not missed anything. For one-off or irregular perks like a staff party, relocation costs or a small gift, that process is wildly disproportionate. That is exactly the problem a PAYE settlement agreement, or PSA, solves. A PSA is a formal arrangement with HMRC that lets the employer settle the tax and National Insurance due on certain benefits and expenses directly, in one annual payment, instead of allocating each item to individual employees. Your staff get the benefit tax-free in practice, and you skip a stack of P11D paperwork. How a PSA works in practice You apply to HMRC for a PSA before the start of the tax year in which you want it to apply, although HMRC will accept applications up to 6 July after the tax year ends in most cases. Once the agreement is in place, any qualifying items you put through it are repor...

Statutory Adoption Pay: What Employers Must Get Right Statutory adoption pay is one of those areas where well-meaning employers get caught out simply because it comes up rarely. Maternity pay queries land on a payroll desk often enough that the process is familiar. Adoption pay, though, might arise once every few years in a small business, which means the rules feel unfamiliar just when they matter most. Getting it wrong can mean underpaying an employee at a stressful time and landing the business with a compliance headache. Here is a practical walkthrough of what employers must get right. Who qualifies for statutory adoption pay The rules mirror maternity pay in many ways, but the trigger points are different. An employee qualifies if they have been continuously employed for at least 26 weeks ending with the week they are notified of being matched with a child for adoption (or, for surrogacy arrangements, the 15th week before the expected week of childbirth). They must also have...

By John Thomas, Senior Accountant Employer National Insurance is one of the largest costs many UK businesses carry, and the changes that took effect in April 2025 are still working their way through budgets and hiring plans. With the 2026-27 tax year now the planning horizon, it is worth a clear-headed look at what employer's NIC actually costs, how the Employment Allowance softens the blow, and the legitimate ways to manage the bill. What changed and what it costs now From 6 April 2025, two significant changes took effect. The rate of employer's National Insurance rose from 13.8% to 15%, and the secondary threshold, the point at which employers start paying, fell from £9,100 to £5,000 a year. The threshold change matters as much as the rate rise. At £5,000, employer NIC starts biting much earlier in each employee's pay. For a full-time employee on £30,000, the annual employer NIC bill is now roughly £3,750, compared with about £2,884 under the old rules. Across a team ...

By John Thomas, Senior Accountant Real Time Information changed payroll forever in 2013: every pay run must be reported to HMRC on or before payday through a Full Payment Submission, the FPS. Get it right and payroll is invisible. Get it wrong and penalties, notices, and employee tax-code chaos follow. Here are the seven RTI mistakes HMRC actually penalises, and how to prevent each one. 1. Filing the FPS late The single most penalised RTI error. The FPS is due on or before the day you pay your employees, not after, and not "when payroll gets around to it". Late filing penalties apply per month, and they scale with the number of employees. Small employers get some leeway on their first default in a tax year, but repeated lateness is penalised automatically. Prevention: lock a payroll calendar with hard internal deadlines two days before payday, and make sure someone owns the submission step explicitly. If you outsource payroll, confirm in writing that your provider fil...

Hiring your first employee is a milestone, but it also switches on a set of payroll duties that catch many small employers out. Get the starter process right on day one and the monthly payroll runs smoothly. Run through this checklist for every new starter. Collect the right details before the first payday You need certain information before you can pay someone correctly. Ask the new employee for their full name, date of birth, home address, national insurance number, employment start date, and details of any student loan. You also need to know whether they have another job or receive a pension, because that changes which tax code applies. The cleanest route is the P45. If the employee has one from their previous job, it gives you their tax code, their pay and tax to date in the tax year, and their leaving date. If there is no P45, and this is common with first jobs, returning workers and overseas hires, ask the employee to complete HMRC's new employee starter checklist. It asks...

P11Ds are done, now what: reporting benefits through payrolling For decades, taxing employee benefits meant the P11D. Company cars, private medical insurance, interest-free loans, and gym memberships were reported after the tax year ended, and the tax was collected later through coding notices. From April 2026, that system ends for most benefits. Payrolling benefits in kind becomes mandatory, which means the tax is collected through the payroll in real time. Here is what employers need to do before the switch. What is changing in April 2026 From the start of the 2026-27 tax year, employers must report most benefits in kind through their Real Time Information payroll submissions. The cash equivalent of each benefit is added to the employee's taxable pay each pay period, and income tax is deducted through PAYE as the year goes on. The P11D and the P11D(b) disappear for those benefits. Employer National Insurance on benefits is still reported and paid separately. Nothing about what...

October is the quiet month for payroll, which is exactly why it is the right month for checks. By December the payroll team is firefighting: Christmas pay dates, bonus runs, and the January self-assessment overlap. The errors that surface then were all visible now. A focused October review takes a day and prevents the December scramble. 1. Reconcile RTI submissions against payroll records Pull your Full Payment Submissions for the tax year to date and reconcile them against your payroll software: gross pay, tax, National Insurance, starters, leavers. Mismatches here are the single most common source of HMRC queries, and they compound silently. An October reconciliation catches six months of drift while there is still time to correct it cleanly. 2. Audit your starter and leaver records Check every starter this year has a correct starter declaration and tax code, and every leaver has a P45 issued and the correct leaving date. Starter errors produce wrong tax codes that take months to...

October sits at an awkward point in the UK payroll calendar. The tax year is halfway through, the year-end feels far away, and it is tempting to let payroll run on autopilot until January. Resist that temptation. October is the ideal moment for a mid-year payroll health check, because anything you catch now can be corrected calmly rather than in the year-end rush. Here are the checks worth running this month. NICs: confirm the right rates are being applied National Insurance rates and thresholds change often enough that payroll software usually keeps up, but the human settings do not always. Check that every employee is on the right NIC category letter. The classic errors are all familiar: a young employee who passed 21 but is still on a younger-worker rate, an apprentice whose apprentice rate expired, or a new director set up on the standard employee threshold when directors have their own annual calculation. Also review any salary sacrifice arrangements. They remain legitimate an...

The payroll year-end does not start in April. It starts in March, with a short checklist that decides whether April is calm or chaotic. Employers who run this routine every March file cleanly and hand out P60s without thinking about it. Here is the routine. 1. Reconcile the payroll against the accounts Before anything is finalised, check that the total pay run for the year matches what actually left the bank and what sits in the payroll control accounts. Small differences accumulate silently over twelve months. March is the month to find and fix them, while there is still time to correct through the payroll rather than through amended filings. 2. Chase the leavers and starters paperwork Every employee who left during the year needs a P45, and the final payroll records need their correct leaving dates. The most common year-end error is a leaving date that is wrong by a month, which then flows into the employee's tax code and their P60. Check the dates now. 3. Confirm benefits a...

  When an owner-manager agrees a £35,000 salary with a new hire, the number in their head is £35,000. The number in the budget should be considerably higher. Employer National Insurance, pension auto-enrolment, and the administrative machinery of running payroll all sit on top of the salary figure, and after the recent employer NIC changes the gap is wider than many businesses have recalculated. Building the loaded cost, line by line Start with the salary, then add employer NICs at the current rate on earnings above the secondary threshold. Then add the employer's minimum auto-enrolment pension contribution. Then the items people forget: payroll software licences, the time cost of RTI submissions and corrections, year-end P60 and P11D administration, and the cost of getting it wrong, which can mean HMRC penalties and interest on late or inaccurate filings. There is also the cover problem. In a small business, payroll knowledge often lives in one person's head. When that pers...

When an employee tells you she is pregnant, the congratulations are the easy part. The admin that follows catches many small employers out: notice rules, evidence requirements, pay calculations, and HMRC recovery all have to be handled correctly and on time. Here is the employer's checklist for statutory maternity pay (SMP), in the order things happen. When she notifies you Your employee must tell you she is pregnant by the end of the 15th week before the expected week of childbirth, and give you her MAT B1 certificate (from her midwife or GP) as evidence. She must also give at least 28 days' notice of when she wants her SMP to start. Log all three: the notification date, the MAT B1, and the intended start date. If any notice is late, you can still pay SMP, but you need the evidence trail. Check she qualifies To qualify for SMP, the employee must have: At least 26 weeks of continuous employment with you by the end of the 15th week before the expected week of childbir...

Every year, a quiet deadline catches out thousands of UK employers. If you gave your staff anything beyond salary in the last tax year, a company car, private medical insurance, an interest-free loan, you probably owe HMRC a report. That report is the P11D, and getting it right is one of the unglamorous disciplines that separates well-run employers from penalised ones. First: did you provide benefits in kind? A benefit in kind is anything of value you give employees that is not part of their pay packet. The common ones: Company cars and fuel Private medical or dental insurance Interest-free or cheap loans over £10,000 Accommodation provided by the employer Assets transferred or made available to employees, such as laptops kept for personal use Certain vouchers and credit tokens Some items are exempt, including the trivial benefits exemption (gifts costing £50 or less that are not cash, not contractual, and not a reward for work), and staff entertaining is not always reportable in the w...

 # RTI Filing Mistakes That Trigger HMRC Payroll Penalties Real Time Information, or RTI, has been with us long enough that most employers treat it as routine. Yet HMRC still issues thousands of payroll penalties every year, and almost all of them come down to a handful of avoidable filing mistakes. Here is what goes wrong, what it costs, and how to keep your submissions clean. ## The FPS deadline: on or before the pay date The golden rule of RTI is simple: the Full Payment Submission (FPS) must reach HMRC on or before the day you pay your employees. Not the day after, not when payroll gets around to it. On or before. Late FPS filing is the single most common trigger for penalties. HMRC runs a risk-based approach and sends warning letters first, but repeat offenders get moved into automatic penalty territory. If your payroll software sends the FPS automatically but your payment date shifts, for example when payday falls on a bank holiday, check the submission went with the right da...

  Congratulations on the new company. Now for the part nobody warned you about: becoming a director creates a personal tax life that is separate from the company, and most of its registrations run on HMRC deadlines that will not wait for you to feel settled. The biggest misunderstanding is that registering your company does the job. It does not. Companies House and HMRC are different organisations, and your company's corporation tax registration does not register you, the individual director, for anything. Here is the practical checklist for your first 30 days. 1. Self Assessment Registration (Yes, You Personally) If you have untaxed income, you must register for Self Assessment yourself. Directors very commonly do: dividends from your own company, rental income, freelance or consultancy side income, and foreign income all count. The rule is the same as for everyone else: if you had untaxed income in the 2025/26 tax year and had not registered before, your registration deadline ...

Workplace pensions are one of those duties that feel automatic until they are not. The law says most employees must be put into a pension scheme and stay there, with contributions flowing every payday. The mechanics are handled by payroll software, so directors assume it is all taken care of. Then The Pensions Regulator writes a letter, and it turns out several quiet tasks were never anyone's job. Here are the auto-enrolment duties UK employers most often forget. Choosing a pension scheme in the first place You cannot enrol staff into nothing. Before your duties start date, you must choose a qualifying workplace pension scheme. Many employers discover this the week their first employee starts, which is too late to choose calmly. Pick a scheme when you take on your first employee, or earlier, and confirm in writing that it meets the qualifying criteria. Assessing every worker, every payday Not everyone gets enrolled, and the categories matter. Eligible jobholders, aged 22 to state p...