What is Payroll Reporting?
- PTA
- 1 day ago
- 24 min read
Index of the Article: Payroll Reporting in the UK
Payroll Reporting in the UK Explained – 2025 Rules, Tax Bands & Core Requirements
Real Time Information (RTI) Payroll Reporting – Mastering Compliance and Avoiding Common Traps
Starters, Leavers & Emergency Tax – Avoiding Payroll Nightmares in the UK
Payroll Software, Year-End Tasks & Fixing HMRC Errors the Smart Way
Payroll Audits, HMRC Compliance Flags, and Future-Proofing Payroll in 2025
The Audio Summary of the Key Points of the Article:
Listen to our podcast for a comprehensive discussion on:
What is Payroll Reporting in the UK?
Payroll Reporting in the UK Explained – 2025 Rules, Tax Bands & Core Requirements
What Is Payroll Reporting in the UK?
Payroll reporting in the UK is the legally required process where employers must calculate, deduct, and submit tax and pay information about their employees to HM Revenue and Customs (HMRC). This system operates in near real-time, thanks to the RTI (Real Time Information) scheme introduced in 2013, and it’s been evolving ever since.
If you’re an employer in 2025, you must report employee wages, Income Tax, National Insurance contributions (NICs), and statutory payments every time you run payroll — not just annually. Sounds intense? Don’t worry, it’s totally manageable when you’ve got the right tools and guidance.
Why Payroll Reporting Matters in 2025
Whether you're a small café in Brighton with 3 staff or a tech firm in Manchester managing 200+ employees, getting payroll right matters. Mistakes can lead to employee complaints, overpaid tax, Universal Credit issues, and even HMRC penalties. Accurate payroll reporting:
Ensures staff get paid the right amount, with the correct deductions
Updates HMRC systems so employees don’t end up on emergency tax
Helps employees qualify for things like tax refunds, maternity pay, or benefits
Keeps your business compliant and avoids fines (starting from £100/month)
Key Tax Updates for the 2025/26 UK Tax Year
Let’s look at the latest numbers, accurate as of March 2025, according to HMRC:
Category | Amount |
Personal Allowance | £12,570 |
Basic Rate (20%) | £12,571 – £50,270 |
Higher Rate (40%) | £50,271 – £125,140 |
Additional Rate (45%) | Over £125,140 |
NIC Threshold (Employees) | £12,570 |
NIC Threshold (Employers) | £9,100 |
Student Loan Plan 1 Threshold | £24,990 |
Student Loan Plan 2 Threshold | £27,295 |
Student Loan Plan 4 Threshold | £27,660 |
Postgraduate Loan Threshold | £21,000 |
These figures are current as of April 2025, forming the backbone of automated payroll calculations done via HMRC-approved software.
How Payroll Reporting Actually Works – Step-by-Step
Here’s a practical breakdown of how payroll reporting works in the UK under the RTI system:
Step 1: Use Approved Payroll Software
You must use HMRC-recognised payroll software. This tool:
Calculates tax and NICs
Generates payslips
Sends reports (like FPS and EPS) to HMRC
Browse HMRC’s list here: gov.uk/payroll-software
Step 2: Run Payroll and Submit an FPS
Before or on payday:
Record each employee's pay, including bonuses or overtime
Apply tax codes, NICs, student loan deductions, etc.
Submit a Full Payment Submission (FPS) to HMRC with all these details
🧠 Example: Alfie Braithwaite, a new graphic designer in York, earns £2,800/month. His employer’s payroll system calculates £400 tax and £230 NICs. These amounts, plus Alfie’s details, are submitted in an FPS before payday hits.
Step 3: Pay HMRC
The payroll software calculates what’s due
Employers must pay HMRC by the 22nd of the following month (if paying electronically) or the 19th (by post)
Graphical Presentation of How Payroll Reporting Actually Works – Step-by-Step
If you’re a smaller business with PAYE bills under £1,500/month, you may opt to pay quarterly.
Late or Incorrect Reporting? Here's What Happens
HMRC’s RTI system is strict. Here’s what you risk if things go south:
Issue | Impact |
Missed FPS Submission | £100–£400 penalty/month + a warning notice |
Incorrect Payroll ID | Duplicated records, wrong tax codes, employee confusion |
No EPS Sent | You might miss claiming relief for things like statutory sick/maternity pay |
No Activity in 120 Days | HMRC may automatically close your PAYE scheme |
How Personal Allowance and Tax Bands Impact Payroll
Understanding Personal Allowance
In 2025/26, employees earning £12,570 or less annually pay no Income Tax thanks to the Personal Allowance. But there’s a catch — once income crosses £100,000, the allowance reduces by £1 for every £2 above the limit.
Example Payroll Tax Calculation
Let’s run a real-life payroll deduction example for better clarity:
Employee: Georgina WhittakerGross Monthly Pay: £4,500Tax Code: 1257L (Standard Personal Allowance)
Deduction | Amount |
Income Tax (Basic & Higher) | ~£693.75 |
Employee NICs | ~£442 |
Student Loan Plan 2 | ~£88 |
Net Pay | ~£3,276.25 |
All these values will be calculated by payroll software and reported through FPS. Georgina can check these deductions herself using HMRC’s tax checker.
Payroll Tip: Don't Let Staff Get Caught in Emergency Tax
If HMRC doesn’t receive the correct info (like a P45 or starter checklist), employees get hit with an emergency tax code, usually 1257L W1/M1. This means:
No tax-free allowance spread over the year
Higher deductions
Lower take-home pay
To fix this, employers must:
Send correct FPS promptly
Update new starter info in payroll software
Inform employees to contact HMRC or check their tax code online
UK Payroll Reporting Statistics Dashboard (2020-2025)
Real Time Information (RTI) Payroll Reporting – Mastering Compliance and Avoiding Common Traps
What Is RTI and Why It Matters More Than Ever in 2025?
Real Time Information (RTI) is the UK government’s system that requires employers to report payroll data every time they pay an employee — not just annually. Since it was rolled out in 2013, HMRC has used RTI to track:
Income Tax and NIC deductions
Employment changes (new starters, leavers, etc.)
Statutory payments (e.g. maternity or sick pay)
Pension deductions and more
In 2025, RTI isn't just a system—it’s your legal payroll lifeline. HMRC uses it to calculate tax codes, determine Universal Credit payments, and even identify benefit eligibility. So, if your business messes up RTI reporting, you could harm both your employees’ wallets and your own legal standing.
Key RTI Submissions You Need to Know
Let’s break down the main reports involved in RTI — because knowing which form to send and when is half the battle.
Full Payment Submission (FPS)
When to send it: On or before payday
The FPS contains all the juicy payroll details HMRC needs to keep your business compliant:
Pay amount before deductions
Income Tax and NIC deductions
Employee details (name, NI number, tax code)
Student loan repayments
Statutory payments (like SSP or SMP)
🧠 Scenario: Let’s say Marjorie Kingswell, a part-time florist in Devon, works 3 days a week and earns £700/month. Her employer pays her on the 28th and sends the FPS to HMRC that same day. That keeps everyone happy — no emergency tax surprises!
Employer Payment Summary (EPS)
When to send it: By the 19th of the following tax month
The EPS is your friend when you’ve got:
Statutory payments to claim back (e.g. SMP, SPP, SAP)
No payments to any employees that month
Apprenticeship Levy reductions
CIS deductions suffered (if you're a contractor)
Skipping this could mean you overpay HMRC or miss out on a reduction.
Full Payment Submission (FPS) Vs. Employer Payment Summary (EPS)
Avoid These Common RTI Mistakes in 2025
Even seasoned payroll pros mess up. Here’s how to dodge the big traps:
1. Submitting Late FPS Reports
Impact: HMRC issues a penalty and a warning noticePenalty range: £100–£400/month depending on employee count
💡 Tip: Use payroll software that auto-reminds you about submission deadlines.
2. Wrong or Missing Payroll IDs
When switching payroll software, employers often accidentally duplicate payroll IDs, confusing HMRC and leading to:
Incorrect tax codes
Two records for the same employee
Over or under-taxation
To fix this, you must tick the ‘Payroll ID changed indicator’ in your new software’s FPS submission.
3. Not Reporting New Starters Correctly
New hires must have:
A completed starter checklist or P45
Correct NI number and tax code inputted
Failing to do this gets them hit with emergency tax. And that gets you hit with complaints.
How RTI Helps HMRC Calculate Tax Refunds and Benefits
RTI isn’t just about HMRC. It directly affects your employees’ financial lives, especially when it comes to:
Refunds: Overpaid tax gets refunded faster when FPS and EPS are accurate
Universal Credit: Monthly income data from RTI is used to calculate benefit entitlement
Pension Auto-Enrolment: RTI confirms contribution status to pension providers
🧠 Real-World Case: In 2024, Nigel Haverford, a part-time caretaker in Leeds, switched to a second job. His old employer hadn’t submitted his final FPS properly, so HMRC thought he was still working there. Result? Emergency tax on both jobs until the issue was sorted — four months later. Don’t be like Nigel’s boss.
What Happens When You Don’t Report to HMRC
Let’s make this real clear. If you skip reports or send them late, HMRC isn’t playing around. Here's what can happen:
Offence | Outcome |
FPS submitted late | Penalty + warning notice |
EPS not submitted after no-pay month | System assumes payments and charges PAYE anyway |
Duplicate Payroll IDs | Duplicated records + tax miscalculations |
No reports for 120 days | PAYE scheme automatically closed by HMRC |
Persistent errors | Potential for PAYE audit and penalties |
💡 Heads up: Late or incorrect reporting can even mess with an employee’s mortgage application, if payslips don’t match HMRC records.
Payroll Frequency & Deadlines: A Quick 2025 Table
Activity | Deadline |
Submit FPS | On or before each payday |
Submit EPS | By the 19th of the next tax month |
Pay HMRC electronically | By the 22nd of the next tax month |
Pay HMRC by post (cheque) | By the 19th |
More details here: www.gov.uk/pay-paye-tax
Can You Fix a Mistake After Sending an FPS?
Yes, and you should. If you realise there’s a blunder (wrong salary, tax code, or ID), send an amended FPS immediately.
You can correct:
Employee details
Payment amounts
Deductions
Payroll IDs
Your payroll software should have this built-in. If not, it might be time to switch.
Moving Forward: Automating RTI the Smart Way
Running payroll manually is risky business. In 2025, smart employers are leaning on cloud-based payroll systems that:
Auto-calculate deductions
Auto-submit FPS/EPS
Alert you to errors
Manage pensions and statutory pay seamlessly
Some of the most popular HMRC-recognised software includes Xero Payroll, Sage 50cloud Payroll, BrightPay, and Moneysoft — find the full list here.
UK Payroll Reporting Statistics (2020–2025)
Starters, Leavers & Emergency Tax – Avoiding Payroll Nightmares in the UK
How to Set Up a New Employee the Right Way
Hiring someone new? You’ve got legal payroll obligations to follow before payday even hits. Get them wrong, and your new hire could end up overtaxed — or underpaid — on day one.
Here’s the correct process as per HMRC’s official guidance:
Step 1: Collect Their P45 or Starter Checklist
If the employee has a P45, use the details to determine their tax code and previous pay.
If they don’t, you must use the HMRC Starter Checklist — it replaced the old P46 form.
You’ll need to confirm:
Previous employment status this tax year
Whether they have a student loan
Date they started working with you
Step 2: Enter Details into Payroll Software
Add:
NI number
Date of birth
Start date
Correct tax code (usually 1257L if unsure)
Step 3: Submit an FPS Before Payday
This tells HMRC, “Hey, we’ve got a new hire!” and sets their record straight from the start.
Graphical Presentation of How to Set Up a New Employee
Emergency Tax Codes: Why They Happen and How to Fix Them
Emergency tax codes are used when HMRC doesn’t have full information about an employee. It typically shows as 1257L W1 or M1 (Week 1 or Month 1).
This means:
Personal allowance is applied per week/month, not annually
Refunds may be delayed
Take-home pay is lower
🧠 Example: When Daphne Truscott, a new dental receptionist in Durham, started work in January 2025 without a P45 or starter checklist, her employer used a temporary emergency code. She overpaid £142 in tax that month. HMRC auto-corrected it 3 weeks later, but Daphne was not pleased.
How to Fix Emergency Tax
Submit accurate FPS info with correct tax code
Ensure the starter checklist is properly completed
Encourage employees to check/update their tax code via their personal tax account
What to Do When an Employee Leaves
Payroll duties don’t stop when someone quits, retires, or is let go. You’ve still got boxes to tick.
Final Pay Includes:
Remaining salary
Holiday pay
Bonuses/commissions
Redundancy payments (if applicable)
Use payroll software to:
Calculate final deductions
Include final pay in the FPS
Mark the employee as a leaver with the leaving date
🧠 Real-life case: When Callum Hensley, a warehouse assistant in Nottingham, left in March 2024, his employer forgot to submit him as a leaver. Result? HMRC thought he still worked there and didn’t adjust his tax code for his next job — so Callum got emergency taxed again.
Processing Refunds and Overpayments in Payroll
Employees sometimes overpay tax — it happens more often than you'd think, especially with mid-year job switches, emergency codes, or overlapping jobs.
Common Scenarios:
Multiple employments (double-taxed due to incorrect tax codes)
Mid-year leavers not receiving full personal allowance
Incorrect student loan deductions
How to Trigger a Refund
If the payroll system shows overpaid tax:
HMRC might auto-refund via payroll (reflected in payslip)
If not, employees must contact HMRC or claim via their personal tax account
How to Repay an Overpaid Employee
If you accidentally overpaid wages:
Try to recover in the next payroll run (if agreed by the employee)
If not, arrange a repayment plan
Keep a written agreement to stay compliant with employment law
💡 Tip: Don’t adjust PAYE tax deductions to “correct” it manually unless you’re a qualified payroll specialist. Use proper adjustment features in your software.
Statutory Payments: Don’t Get Tripped Up
Employees on sick leave, maternity, paternity, or adoption leave are entitled to statutory pay — and the payroll system must handle this properly:
Payment Type | Amount (2025) | Duration |
Statutory Sick Pay (SSP) | £116.75/week | Up to 28 weeks |
Statutory Maternity Pay (SMP) | 90% of average pay for 6 weeks, then £184.03/week | Up to 39 weeks |
Statutory Paternity Pay | £184.03/week | Up to 2 weeks |
Statutory Adoption Pay | Same as SMP | Up to 39 weeks |
Use EPS submissions to reclaim some of these payments from HMRC (usually 92% for small businesses).
Student Loan & Postgraduate Loan Deductions
These are triggered based on the starter checklist, not the P45.
2025 Thresholds
Loan Plan | Repayment Threshold | Rate |
Plan 1 | £24,990 | 9% |
Plan 2 | £27,295 | 9% |
Plan 4 (Scotland) | £27,660 | 9% |
Postgraduate Loans | £21,000 | 6% |
Always double-check these are turned on in payroll software settings. Missed deductions can lead to repayment chaos and HMRC letters for both employer and employee.
Workplace Pension Auto-Enrolment: Mandatory for New Starters
If your employee is:
Over 22
Earning £10,000+/year
Working in the UK
Then you must auto-enrol them into a pension scheme (like NEST or The People’s Pension). Contributions in 2025 remain:
Employee: 5%
Employer: 3%
Total: 8% of qualifying earnings
Make sure the payroll software records pension deductions accurately and reports them to your provider.
Payroll Software, Year-End Tasks & Fixing HMRC Errors the Smart Way
Choosing the Right Payroll Software in 2025
Let’s face it — payroll’s gotten too complex to manage manually. Whether you’re running a two-person consultancy in Bath or a 50-person logistics team in Sheffield, using the right software can mean the difference between flawless compliance and an HMRC penalty letter.
Must-Have Payroll Software Features (2025)
Look for tools that offer:
Full RTI compliance (FPS, EPS, EYU support)
Automatic tax code updates via HMRC
Payslip generation (print/email)
Integration with pensions and auto-enrolment
Expense and benefit tracking
Year-end reports (P60, P11D support)
💡 Pro Tip: HMRC does not endorse specific software, but you can find a list of HMRC-recognised payroll software that fits your business type and budget.
Popular UK Payroll Tools (2025)
Software | Best For | Starting Price |
BrightPay | Small businesses | From £99/year |
Moneysoft | Accountants and SMEs | From £72/year |
Xero Payroll | Integrated finance + payroll | From £5/month |
Sage 50 Payroll | Larger employers | From £75/month |
QuickBooks | Easy-to-use for microbusinesses | From £8/month |
The Payroll Year-End Checklist (April–July)
Year-end can sneak up on even seasoned employers. Here’s what needs doing before and after 5 April, the official end of the UK tax year.
1. Submit Your Final FPS
Do this on or before your last payday of the tax year
Confirm final pay and deductions for each employee
2. Update Payroll Records from 6 April
Reset year-to-date values
Adjust tax codes if notified by HMRC
Remove leavers or deceased employees
3. Update Payroll Software
Most providers release updates in early April. Install them before running your first payroll of the new year to avoid calculation errors.
4. Issue P60s by 31 May
Every employee still on your books on 5 April must receive a P60 summarising their annual pay and deductions.
🧠 Example: When Millicent Reeves, a hospitality manager in Kent, didn't get her P60 in 2024, she couldn’t submit her mortgage application on time. The employer had to issue a corrected one manually — costing time and reputation.
5. Report Benefits by 6 July
If you’ve provided any benefits in kind (like company cars, gym memberships, or
health plans), you must:
Dealing With HMRC Errors — Yes, It Happens
Even when you’ve done everything right, HMRC can still make mistakes. Here’s how to spot and fix them fast.
1. Your Employee Gets the Wrong Tax Code
If an employee’s tax suddenly spikes, check if HMRC applied:
An emergency code (e.g. 1257L W1/M1)
An old employer still listed as “active”
Duplicate records from system errors
Fix: Update details via your software → reissue FPS → employee should contact HMRC via personal tax account
2. You’ve Paid the Correct Tax — But HMRC Says You Haven’t
If you’ve submitted and paid everything but HMRC claims otherwise:
Double-check payment reference numbers (must include your 13-character Accounts Office Reference + YYMM)
Use your HMRC online account to confirm payments received
Call the Employer Helpline with payroll and payment logs
🧠 Real Case: In 2023, a Midlands café owner was threatened with penalties due to a misapplied PAYE payment. Turns out, they’d used the wrong month code in their bank transfer. A quick call and reallocation sorted it.
3. Refunds Owed but Not Received
If your FPS or EPS shows HMRC owes you (due to statutory payments reclaimed or overpaid tax):
They may offset it against future PAYE bills
If not, request a manual refund via your HMRC Business Tax Account
When to Contact HMRC — And What Info You’ll Need
Before you pick up the phone, have the following handy:
PAYE reference number
Accounts Office reference
Copies of FPS/EPS sent
Software reports showing submissions/payments
Employee NI numbers and tax codes (if specific to one case)
HMRC Helpline: 📞 0300 200 3200 (Mon–Fri, 8am to 6pm)
What If You Miss a Year-End Deadline?
Missed Task | Deadline | Penalty |
P60 not issued | 31 May | £300 per failure + £60/day after notice |
P11D or P11D(b) late | 6 July | £100/month per 50 employees |
Class 1A NIC not paid | 22 July (electronic) | Interest + potential surcharge |
💡 Tip: Always double-check deadline calendars in your software dashboard. Many modern payroll apps flag missed actions before it’s too late.
Real Automation Setups From UK SMEs
Let’s see how real businesses are smashing compliance through smart automation.
🌿 Case Study: EcoCrafts Ltd, Birmingham
Employees: 12
Software: BrightPay + NEST pension
What They Automated:
Auto FPS and EPS filing
Emailing payslips
Pension deductions and submissions
Result: Reduced admin time by 70% and never missed a deadline since 2022
⚙️ Case Study: Wetherby Engineering Ltd, Leeds
Employees: 35
Software: Sage Payroll + Xero
Challenge: High staff turnover, frequent new starters
Solution:
Integrated digital starter checklists
Weekly pay runs automated with batch reports
Result: Recovered £3,200 in statutory pay via EPS in one year
Payroll Audits, HMRC Compliance Flags, and Future-Proofing Payroll in 2025
What Triggers a Payroll Audit From HMRC?
HMRC isn’t going to knock on every employer’s door — but when they do show up, it’s usually not random.
Here are the top red flags that might get you audited:
1. Inconsistent RTI Submissions
Late or missing FPS and EPS filings
Employee records not matching PAYE data
Conflicting tax figures in year-end reports (P60s, P11Ds)
2. Suspicious Pay Patterns
Large or frequent payroll corrections
Excessive use of zero or low tax codes
Sudden drops in declared pay for multiple employees
🧠 Example: In 2024, HMRC flagged a Midlands-based marketing agency for reporting identical wages and tax codes for all staff — 7 months in a row. After review, it turned out to be a payroll software glitch. They escaped penalties but received a formal warning.
3. Benefit-in-Kind Mismatches
If your P11Ds suggest underreporting of company benefits (like vehicles, private healthcare, or accommodation), that’s a common audit magnet.
What Triggers a Payroll Audit From HMRC?
What an HMRC Payroll Compliance Check Looks Like
HMRC calls these “Employer Compliance Reviews”, and they’ll generally give notice before starting.
Here’s what to expect:
Stage | What Happens |
Initial Notice | HMRC contacts you by letter or call; requests payroll records (last 4 years) |
Desk Review | HMRC reviews data offsite — often before deciding if a visit is needed |
Onsite Inspection | If concerns remain, they’ll visit your office or accountant |
Interviews | They may interview directors, payroll managers, or employees |
Findings Letter | They summarise results and issue a penalty or closure notice |
How to Stay 100% Compliant (and Audit-Ready)
Let’s get proactive — these tips won’t just protect you from audits, they’ll also simplify day-to-day payroll management.
1. Keep Your Payroll Records for 3–4 Years
This includes:
Payslips
P60s, P45s
FPS/EPS submission reports
Holiday pay records
Expense reimbursements
Pension contributions and enrolment notices
💡 Use cloud storage or digital HR platforms like BreatheHR or Personio to auto-organise these.
2. Run Internal Payroll Audits Every 6 Months
Create a mini checklist to audit:
Duplicate NI numbers or tax codes
Starters/leavers reported correctly
Student loan and pension deductions active where needed
No negative or suspicious pay entries
3. Assign One Person to Own Payroll Compliance
Whether it’s your payroll officer, accountant, or HR lead — make it someone’s job to ensure:
RTI deadlines are met
Software stays up to date
Statutory payments are claimed back properly
Staff changes are documented
How to Stay Compliant and Audit-Ready
AI & Payroll: Future-Proofing With Smart Tools
In 2025, top-performing UK employers are using AI-powered platforms to:
Task | Smart Tech Used |
Real-time error detection | Auto-flag over/underpayments in software |
Compliance alerts | Email reminders for P60s, RTI deadlines |
Fraud prevention | Pattern recognition to flag anomalies |
Employee access | Self-service portals via payroll apps |
Look for tools with open HMRC API integration — this allows two-way syncing of tax codes, refunds, and submissions. Xero, Sage, and BrightPay all now offer this in real-time.
Key Dates to Keep on Your Calendar (2025–2026)
Task | Deadline |
Submit first 2025/26 FPS | April 2025 (first payday) |
Issue P60s to employees | 31 May 2025 |
Submit P11Ds for benefits | 6 July 2025 |
Pay Class 1A NICs | 22 July 2025 (online) |
Quarterly PAYE (small employers) | 22 July, 22 Oct, etc. |
Last FPS of tax year | April 2026 (last payday) |
Pro tip: Use a shared compliance calendar on Google Workspace or Microsoft Teams to alert your team in advance.
Closing Advice: Payroll Should Empower, Not Scare
Payroll reporting isn’t just a legal checkbox — it’s the financial backbone of your business. Done well, it keeps employees happy, avoids HMRC drama, and earns your business credibility with banks, accountants, and investors.
Stay current, stay compliant, and leverage smart tools — and you’ll be steps ahead of the pack.
🔗 Key Resources Recap:
Summary of All the Most Important Points Mentioned In the Above Article
UK employers must report payroll data to HMRC on or before each payday using Real Time Information (RTI) submissions like FPS and EPS.
The standard Personal Allowance for the 2025/26 tax year is £12,570, with Income Tax bands and NIC thresholds updated accordingly.
Using HMRC-recognised payroll software is mandatory for accurate tax calculations, payslip generation, and RTI compliance.
New employees must be set up using a P45 or HMRC’s starter checklist to avoid emergency tax codes and incorrect deductions.
Employers must handle leavers properly by submitting their final pay and marking them as leavers in the FPS.
Employees who overpay tax can receive automatic refunds through payroll or must claim via HMRC’s personal tax account.
Statutory payments (SSP, SMP, etc.) must be processed correctly and can be reclaimed through EPS reports submitted to HMRC.
Year-end payroll duties include submitting the final FPS, issuing P60s by 31 May, and reporting benefits via P11Ds by 6 July.
HMRC audits may be triggered by late or inconsistent submissions, unusual payroll patterns, or missing benefit reports.
Employers can future-proof payroll by automating reporting, syncing with HMRC in real time, and conducting regular internal audits.
How Payroll Reporting it Works
How a Professional Accountant Like Pro Tax Accountant Can Help You With Payroll Management
Payroll management might sound like just pushing numbers into software every month — but in reality, it’s a complex, regulation-heavy, and high-stakes process that can make or break your business operations. From paying staff correctly to meeting HMRC deadlines and staying compliant with UK employment law, getting payroll right is non-negotiable.
That’s where a professional accountant, like the team at Pro Tax Accountant, steps in to save your business time, money, and legal headaches. Whether you're a growing startup, an established SME, or even a sole trader with occasional staff, partnering with payroll experts can streamline your operations and keep you out of hot water with HMRC.
Let’s explore the real value of having a professional accountant manage your payroll — and why so many UK businesses are choosing expert support over DIY risk.
1. Ensuring Compliance With UK Payroll Laws
One of the most important (and challenging) aspects of payroll in the UK is compliance. HMRC’s rules around PAYE (Pay As You Earn), RTI (Real Time Information), pensions, and statutory pay are constantly evolving. Mistakes in reporting or late filings can result in penalties, interest charges, and audits.
A professional accountant like Pro Tax Accountant:
Files Full Payment Submissions (FPS) and Employer Payment Summaries (EPS) on time
Keeps your business up to date with changes in tax codes, National Insurance thresholds, and pension auto-enrolment rules
Helps avoid emergency tax situations that can upset your employees
Makes sure your business meets every requirement for year-end reports, including P60s and P11Ds
This level of compliance support is not just helpful — it’s mission-critical for any employer.
2. Accurate Salary, Tax & Deduction Calculations
Payroll isn’t just about paying employees a flat number. You need to:
Calculate gross-to-net pay
Deduct Income Tax, National Insurance Contributions (NICs)
Process student loan repayments, pension contributions, and benefit-in-kind tax liabilities
Handle holiday pay, overtime, sick pay, maternity/paternity leave, and more
Even a small miscalculation can snowball into tax arrears, overpayments, or underpayments. A professional accountant ensures every payslip is correct — no more manual errors or last-minute panics.
At Pro Tax Accountant, their payroll service includes full payslip generation, correct HMRC deductions, and accurate reporting for each employee — every month.
3. Real Time Information (RTI) Submissions Done Right
Since 2013, HMRC has required employers to report pay and deductions every time an employee is paid, through a system called Real Time Information (RTI).
Missing these submissions, submitting incorrect information, or using outdated tax codes can lead to:
Penalties from HMRC
Employees being placed on emergency tax codes
Problems with Universal Credit claims and mortgage applications
Accountants like Pro Tax Accountant handle RTI submissions seamlessly using HMRC-approved software, ensuring every report is timely, accurate, and complete — so you don’t have to worry about compliance issues.
4. Saves Time and Reduces Administrative Burden
Running payroll in-house can be time-consuming — especially when you're juggling other parts of your business like customer service, inventory, marketing, and compliance.
Letting an accountant manage payroll means:
No more chasing tax codes or NIC tables
No more manually checking pension contributions
No more stress about getting reports to HMRC on time
No more errors from non-integrated systems
Pro Tax Accountant offers fully managed payroll services, freeing you to focus on what you do best — growing your business.
5. Helps You Avoid Penalties and Fines
HMRC charges penalties for:
Late FPS submissions
Incorrect PAYE reports
Missing year-end declarations
Incorrect handling of statutory payments
A professional accountant proactively reviews your payroll, spots risks early, and keeps you ahead of deadlines — helping you avoid costly fines that can hurt your business’s bottom line.
And if HMRC raises a compliance query, you’ve got a team that knows your payroll inside out and can respond confidently on your behalf.
6. Manages Starters, Leavers, and Temporary Staff Efficiently
Bringing in new employees? Letting someone go? Hiring seasonal workers?
Each scenario requires unique reporting steps, from sending starter checklists to issuing P45s, calculating final pays, and closing payroll records correctly.
Your accountant handles it all:
Submits correct forms
Flags payroll IDs for changes
Avoids common mistakes like duplicate employee records
With Pro Tax Accountant, your onboarding and offboarding processes are compliant, organised, and smooth for everyone involved.
7. Seamless Integration with Pension Providers
By law, UK employers must auto-enrol qualifying staff into a workplace pension and make minimum contributions. Failing to enrol or report these correctly can lead to penalties from The Pensions Regulator.
Your accountant:
Monitors employee eligibility
Calculates contributions
Sends data to providers like NEST, The People’s Pension, or Aviva
Manages opt-outs and re-enrolment cycles
This ensures you stay on the right side of pension law — without drowning in paperwork.
8. Expert Advice When Things Go Wrong
What if you’ve underpaid an employee? Reported the wrong tax code? Or missed a submission?
Professional accountants don’t just process numbers — they provide strategic support. If something goes wrong, they know how to:
Contact HMRC and fix the issue
Submit an amended FPS
Recover or repay overpaid tax
Reconcile year-end figures correctly
With Pro Tax Accountant, you have real human experts (not just software!) on hand to help you course-correct fast.
9. Scalable Services As Your Business Grows
As your team grows, so does the complexity of your payroll. With a professional accountant, your payroll processes scale alongside you:
Add or remove employees quickly
Expand to multi-location or multi-pay-period setups
Handle varied contract types — freelancers, part-time, zero-hour
Track employee benefits, allowances, and perks efficiently
Whether you’re adding your 5th employee or your 50th, Pro Tax Accountant adapts to meet your needs.
10. Peace of Mind You Can’t Put a Price On
Ultimately, the best reason to use a professional accountant for payroll management is peace of mind. You’ll sleep better knowing:
Your employees are paid accurately and on time
Your HMRC obligations are being handled
You’re not missing anything critical
Your business is protected from payroll-related risk
With Pro Tax Accountant, you get that peace of mind — and an experienced partner invested in your success.
Payroll isn’t just a back-office task. It’s a legal obligation, a vital business process, and a huge source of risk if mishandled. Working with a professional accountant like Pro Tax Accountant ensures your payroll is accurate, compliant, efficient, and scalable.
Whether you're just starting out or managing dozens of staff, professional payroll services can free up your time, reduce your stress, and keep your team — and HMRC — happy.
👉 Explore payroll services now at Pro Tax Accountant and find out how they can simplify your payroll today.
FAQs
Q1. What are the penalties for submitting incorrect payroll information multiple times in a tax year?
A. HMRC may issue escalating penalties for repeated inaccuracies, starting with warnings and progressing to fines of up to £3,000 per tax year for persistent non-compliance or deliberate errors.
Q2. Can you submit a payroll correction after the tax year has ended?
A. Yes, employers can use the Earlier Year Update (EYU) or a revised FPS to correct payroll errors from previous tax years, though HMRC now prefers amended FPS submissions.
Q3. Do you need to report directors’ pay differently through payroll?
A. Yes, directors can be paid annually or monthly and must be flagged as such in payroll software, with Class 1 NIC calculated using an annual earnings basis unless a different method is chosen.
Q4. Are holiday pay and bonuses subject to Real Time Information (RTI) reporting?
A. Yes, any payments made to employees, including holiday pay and bonuses, must be included in the FPS on or before the date they are paid.
Q5. Can payroll be run manually without software for fewer than 10 employees?
A. No, even small employers must use HMRC-recognised payroll software unless they qualify for rare exemptions, such as religious objections or no internet access.
Q6. How do you handle payroll if your employee works irregular hours or has zero-hour contracts?
A. Employees on irregular hours must still be paid and reported under RTI each time they work, with PAYE deductions based on their earnings that period.
Q7. What happens if you accidentally pay an employee twice in one pay period?
A. The overpayment must be reported in the FPS and recovered through agreed deductions or repayment, ensuring PAYE figures remain accurate for both employer and HMRC.
Q8. How long should you retain payroll records in the UK?
A. Employers must keep PAYE records for at least 3 years after the end of the tax year they relate to, but 6 years is recommended for audit protection.
Q9. Can you outsource payroll reporting to an external accountant or bureau?
A. Yes, businesses can appoint a payroll agent to manage and submit all payroll information, but the employer remains legally responsible for compliance.
Q10. Is it necessary to report volunteer or unpaid intern data through payroll?
A. No, if the individual receives no payment or benefits in kind, they are not considered employees and do not need to be reported through payroll.
Q11. How does payroll reporting work for employees working overseas for a UK company?
A. UK-based employers may need to report and pay PAYE for overseas employees if they are considered UK tax residents or perform duties related to UK business operations.
Q12. What happens if you miss the first FPS submission for a new employee?
A. You may receive a late filing notice and a penalty from HMRC, and the employee could be placed on an emergency tax code until corrected information is submitted.
Q13. Do temporary or seasonal workers need to be added to payroll?
A. Yes, any worker who is paid wages must be included in payroll and reported via FPS, even if they work for a single week or only part of the year.
Q14. Can you use the same payroll ID when rehiring a former employee?
A. No, you must assign a new payroll ID unless there is continuity of employment and no break in service; otherwise, mark the new FPS with a new starter declaration.
Q15. What payroll reports are needed for HMRC inspections or audits?
A. HMRC may request P11 records, RTI submission logs, payslips, payroll journals, statutory payment records, and proof of pension contributions for compliance checks.
Q16. How do payroll deadlines differ for weekly vs monthly pay periods?
A. The FPS must be submitted on or before each payday, so employers running weekly payroll must report more frequently than those paying monthly.
Q17. Are there special payroll rules for employees under 21 or apprentices?
A. Yes, both groups benefit from reduced employer NIC rates on earnings below the Upper Secondary Threshold (£50,270 for 2025/26), but they still require RTI reporting.
Q18. Can HMRC impose penalties for incorrect student loan deductions?
A. Yes, incorrect or missed deductions may result in backdated demands for the employer and employee, and HMRC may impose penalties for non-compliance.
Q19. Do you need to report payroll if no employees were paid during a tax month?
A. Yes, you must submit an EPS stating no payments were made that period to avoid incorrect charges or late filing notices from HMRC.
Q20. What’s the difference between an FPS and an EPS in payroll reporting?
A. The FPS reports actual payments and deductions made to employees, while the EPS is used to report adjustments, such as statutory pay recoveries or nil payment periods.
-Disclaimer:
The information provided in our articles is for general informational purposes only and is not intended as professional advice. While we strive to keep the information up-to-date and correct, Pro Tax Accountant makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the website or the information, products, services, or related graphics contained in the articles for any purpose. Any reliance you place on such information is therefore strictly at your own risk. The graphical stats may also not be 100% accurate.
We encourage all readers to consult with a qualified professional before making any decisions based on the information provided. The tax and accounting rules in the UK are subject to change and can vary depending on individual circumstances. Therefore, Pro Tax Accountant cannot be held liable for any errors, omissions, or inaccuracies published. The firm is not responsible for any losses, injuries, or damages arising from the display or use of this information.
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