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Payroll Best Practices for UK Employers
Your complete guide to the payroll best practices, covering compliance basics and how to reduce errors, to GDPR rules and preparing for year-end.
When it comes to payroll, you can’t afford to get it wrong. And we mean that quite literally. That’s why it’s important to have as many payroll best practices as possible in place to make sure that your payroll process is as efficient as possible.
But what exactly are payroll best practices?
The sections in this guide cover each of these areas in detail; from compliance basics and record-keeping to managing risks and preparing for year-end, you’ll have the best practices at your fingertips.
Setting up payroll for the first time
Before we get into the details of the payroll best practices, let’s first cover the very beginning; setting up PAYE for the first time.
If you’re taking on your first employee—or paying yourself a salary as a company director—you need to set up PAYE before your first payday. Here’s what that involves and how to do it in the right order.
Register as an employer with HMRC
You must register before your first payday to receive your employer PAYE reference number. Registration is free and done online at GOV.UK. You cannot register more than two months before you start paying people.
Once registered, HMRC will issue two references you’ll need for all future payroll submissions: your Employer PAYE Reference and your Accounts Office Reference. You’ll need to enter this in whatever software you choose to use, or provide it to your service provider before running your first payroll.
If your reference hasn’t arrived by the time you need to pay someone, you can still run payroll and pay your employees on schedule—run payroll as normal, store your Full Payment Submission, then send it to HMRC once your PAYE reference number arrives.
Choose payroll software
You’ll need payroll software to record employee details, calculate pay and deductions, and report to HMRC. Depending on the size of your business, you have options as to what software you choose. HMRC offers free Basic PAYE Tools which is suitable for businesses with up to 10 employees; otherwise, commercial software is your best option, offering more functionality as your team grows. And you could always choose to outsource your payroll to an external provider too.
Whatever you choose, make sure the software is HMRC-recognised and capable of submitting Real Time Information (RTI). This is a non-negotiable requirement—all PAYE and payroll submissions must go through RTI-compliant software.
Set up your employees
Before you can run your first payroll, you’ll need to set up each employee in your system. For each person you’ll their starter information including full name, address, date of birth, national insurance number, tax code, and more.
For new starters, ask them to complete the HMRC starter checklist, regardless of whether they have a P45 or not. This determines their tax code and makes sure they’re not placed on an emergency code that could result in over or underpayment of tax from day one.
Understand what you need to submit and when
Once payroll is running, you must make regular submissions to HMRC and make sure you pay any taxes on time. That means a Full Payment Submission (FPS) sent on or before every payday, and an Employer Payment Summary (EPS) in any month where you haven’t paid anyone or need to claim Employment Allowance or reclaim statutory payments.
PAYE payments to HMRC are due by the 22nd of the following month electronically. Missing this deadline can trigger interest and penalties even when the underlying payroll is correct.
Register for a workplace pension scheme
If any of your employees are aged between 22 and State Pension age and earn above £10,000 per year, auto-enrolment applies from their first day of employment. You’ll need to choose a qualifying pension provider and register before you take on your first eligible employee.
Keep records from the start
As an employer, you’re legally required to keep accurate records of your payroll and employee information. This includes records of pay, tax, National Insurance, and any other deductions, as well as employee details such as name, address, and date of birth. Build these habits in from day one. It’s far easier to maintain good records throughout the year than to reconstruct them at year-end or under an HMRC inspection.
Running accurate payroll
One of the most important payroll best practices is accuracy and that goes beyond getting the right number on a payslip. It covers correct deductions, the right documents issued at the right time, and timely reporting to HMRC—all of which carry legal obligations.
After all, the consequences of payroll errors are felt quickly: your employee’s trust declines, HMRC penalties stack up, and a lot of time gets spent fixing mistakes that should never have happened.
Three things underpin accurate payroll:
Clean, accurate data
Every employee record needs to be accurate, current, and complete—from bank details and NI numbers to employment status and student loan plans.
Compliant processes
Your payroll runs need to follow HMRC rules every time, not just most of the time. That means correct deductions, timely submissions, and the right documents issued to the right people.
Up-to-date knowledge
Payroll legislation changes regularly. Tax bands, statutory payment rates, NI thresholds—these shift year on year, and your processes need to shift with them.
With that in mind, let’s look at the most common payroll errors and what good payroll practice looks like to help reduce them.
Reducing payroll errors
It’s easy to see how a manual input error—a wrong figure, a missed entry, a field left blank—can make it onto a payslip. After all, human error is inevitable. But, it does have repercussions. If someone’s pay is short or, even worse, they haven’t been paid at all, they will contact HR, and suddenly your teams are spending time unpicking a mistake that should have never happened.
The most effective fix is to reduce manual input in the first place. Automating timesheet data directly into payroll cuts down on touch points and removes a lot of the opportunity for error. For anything that does need to be entered manually, a date-driven payroll system means corrections can be made quickly and the recalculation happens automatically.
Missed submissions like the Employer Payment Summary (EPS) can trigger HMRC penalties even when the underlying payroll is correct. The simplest fix is to build reminders into your payroll calendar well ahead of the 19th of each month, not on the day itself. Better still, configure your payroll software to automate Real Time Information (RTI) submissions alongside BACS payments so that the two stay in sync; nothing is missed and avoid penalties from HMRC. A win-win!
One of the most disruptive errors is paying a leaver their full salary because their leave date wasn’t updated before BACS ran. It creates an awkward situation for the employee and a lot of admin to resolve.
When it does happen, the priority is transparency: generate a scratch payslip so the employee can clearly see what occurred, then agree a repayment plan that’s manageable for them; spreading the amount as a loan deduction over several months is standard practice. To prevent it, add a final automated leaver check to your pre-BACS run process.
Auto-enrolment errors are more common than most people realise—and because pension statements don’t come out monthly, they can go unnoticed for a long time. If contributions are missed, the employer is responsible for backdating both the employee’s deductions and their own contributions and notifying the pension provider.
The best way to catch this early is a regular reporting check. Run one after each payroll to confirm auto-enrolment was triggered for everyone it should have been.
Assigning the wrong NI category to an employee—particularly a new starter—means they could be over or underpaying NI from day one. It’s usually a manual input error, and it’s easily fixed once spotted: correct the category, backdate the adjustment, and the right amounts are applied going forward. The smarter fix is to configure your payroll system to assign NI codes automatically at the point of onboarding, rather than relying on manual entry.
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Payroll compliance best practices
Meeting your legal obligations consistently is one of the foundations of payroll best practices. And, in the 2026-27 business year, there’s significant payroll and employment compliance changes to adapt to.
Keeping accurate employee data
The correct personal information for your employees isn’t just vital for accurate payroll; it’s also a legal requirement.
Accurate employee records are the foundation of good payroll. You need up-to-date personal details for everyone on your payroll. And since those details change (bank accounts, addresses, names), maintaining them is an ongoing job, not a one-off task.
Beyond personal information, you’ll need to record each person’s employment status and payroll ID. For non-UK citizens, you’ll also need to confirm their right to work. Irish citizens can show their passport; others should have a government-issued share code, which you can verify online. (Full guidance is at www.gov.uk.)
You’ll also need to know which student loan plan each employee is on—there are four, each with different thresholds and deduction rates. For new joiners, get a P45 from their previous employer and complete an HMRC starter checklist (kept for three tax years). For leavers, confirm final pay and issue a P45 promptly.
Pay and statutory payments
Pay is more complex than agreeing a salary. You need to be clear on contract terms, overtime, holiday pay, and a range of statutory payments, some of which change year on year.
National Living Wage and National Minimum Wage are non-negotiable. The rates are reviewed annually, and failure to pay the correct minimum is one of the most visible compliance failures an employer can make, as HMRC names and shames employers who get it wrong.
Holiday pay is a legal entitlement, but calculating it correctly is more complex than many employers realise—particularly for workers whose pay varies. For employees with fixed hours and a consistent salary, holiday pay is straightforward: they receive their normal pay while on leave. The complexity arises with workers on variable hours, shift patterns, or those who regularly receive commission, overtime, or allowances. For these workers, holiday pay must reflect their normal remuneration, not just their base rate.
Holiday entitlement for these workers is now calculated at 12.07% of hours worked in a pay period, and employers can choose to pay this as an accrual (rolled-up holiday pay) provided it is shown separately on the payslip and not used to avoid other statutory rights.
For all workers, the statutory minimum is 5.6 weeks of paid holiday per year (including bank holidays, unless your contracts provide for these separately). Getting this wrong, either by underpaying or miscalculating entitlement, can result in unlawful deduction of wages claims, so it is worth reviewing how your payroll system handles holiday pay calculations, especially for anyone not on a standard contract.
From 6 April 2026, SSP is payable from the first day of sickness absence for all employees, regardless of earnings. The rate is the lower of £123.25 per week or 80% of average weekly earnings, for up to 28 weeks.
Statutory maternity pay is payable for up to 39 weeks. The first six weeks are paid at 90% of average weekly earnings, with the remaining 33 weeks at the lower of the standard weekly rate or 90% of average weekly earnings. Employers can reclaim 92% of SMP from HMRC (or 103% if you qualify for Small Employers' Relief).
This is payable for up to two weeks at the standard weekly rate, provided the employee meets the eligibility criteria.
SAP mirrors SMP in structure; 90% of average weekly earnings for the first six weeks, then the standard rate for up to 33 weeks.
Shared parental pay allows eligible parents to share up to 50 weeks of leave and up to 37 weeks of pay between them. The administrative burden here falls on the employer to verify eligibility and process correctly.
This is two weeks' pay at the standard rate for employees who lose a child under 18 or suffer a stillbirth after 24 weeks of pregnancy.
Where your organisation offers enhanced pay above the statutory minimums, your payroll system needs to handle both the statutory element (for reclaim purposes) and the enhanced element separately. Keep clear records of both throughout.
Employee deductions
Alongside paying your people, you’re responsible for deducting and passing on income tax, National Insurance (NI), student loan repayments, pension contributions, and more. Accuracy here is essential. You’re handling other people’s money, after all.
Tax and NI mean staying on top of current bands, allowances, thresholds, and category letters. Salary sacrifice arrangements must never take someone below National Minimum Wage. Attachment of earnings orders (court-mandated deductions) must be applied exactly as specified. Pension contributions need to align with both the employee’s agreement and auto-enrolment regulations.
IR35 and off-payroll working
If your organisation uses contractors or freelancers, it’s worth understanding IR35 (also known as the off-payroll working rules). These rules exist to make sure people who work like employees—but through a limited company—pay broadly the same tax as those on the payroll.
For medium and large private sector organisations, it’s your responsibility to assess each contractor’s IR35 status and issue a Status Determination Statement (SDS). If a contractor is deemed ‘inside IR35’, you’ll need to deduct income tax and NI before paying them. Getting this wrong can lead to significant back payments and penalties.
HMRC offers the Check Employment Status for Tax (CEST) tool to help with IR35 assessments. It’s a useful starting point, though complex cases benefit from professional advice alongside it.
Payroll documents
Every employee must receive a payslip on or before payday, showing earnings before and after deductions, plus a breakdown of each deduction. Hourly workers should also see the number of hours worked. Payslips can be paper or electronic but they must go out on time, every time.
When someone leaves, issue a P45 promptly. It records tax paid in the current year along with their address and NI number, and their new employer will need it to set them up on payroll.
Workplace pensions
Auto-enrolment means you must automatically enrol all eligible employees into a qualifying workplace pension. To be eligible, someone needs to be between 22 and State Pension age and earn above £10,000 per year. Both you and the employee contribute—the minimum total contribution is 8% of qualifying earnings, with at least 3% coming from you as the employer and the remaining 5% from the employee. Employees can opt out, but the default means they will be opted in automatically, so you need to make sure that’s correctly working every pay period.
Qualifying earnings are calculated on the band between £6,240 and £50,270 per year, not on total salary. It’s worth noting that there are active proposals to lower the auto-enrolment age from 22 to 18 and remove the lower earnings limit, though these haven’t been implemented yet. It’s something to keep an eye on.
Reporting to HMRC
Every time you pay employees, you need to send a Full Payment Submission (FPS) to HMRC via your payroll software. If you haven’t paid anyone in a tax month, send an Employer Payment Summary (EPS) instead. You can also use the EPS to reclaim statutory payments, claim Employment Allowance, or report the Apprenticeship Levy.
Organisations with 250 or more employees also need to report gender pay gap data annually. For a fixed snapshot date each year (31 March for public bodies, 5 April for everyone else), you’ll need to calculate and publish:
- The percentage of men and women in each hourly pay quarter
- Mean and median gender pay gaps for hourly pay and bonus pay
- The percentage of men and women receiving bonus pay
Choosing the right payroll software
There are various factors to consider when choosing the best payroll software for your business:
Compliance
One of the most important aspects of payroll (other than the obvious payday excitement) is compliance. And this should be central to your decision-making process to make sure your payroll is HMRC-compliant, including PAYE, National Insurance, and Real Time Information (RTI) filing.
Integration
If you already have existing HR and accounting systems, your new provider may be able to integrate with your current systems, or if not, fill any gaps you might have.
Support
Your provider’s support model is a crucial consideration during the buying process. You should expect access to an on-hand implementation team, but make sure you’re clear on what support you have beyond that point. Things like a UK-based support team or a dedicated account manager are some key things to look out for as well as service level agreements (SLAs). This extends to training too so that your team know how to use your new software.
Business size
Small, mid, or large businesses will all have different solution needs. Luckily, the market is full of different software providers who cater to specific business sizes; so, whether you’re a small business looking for a simple solution or a mid-large looking for scalability, there’ll be a software for you!
Budget
Like anything, software prices can vary significantly, so keep your budget in mind when choosing the software provider for you. But, as with anything, the cheapest option isn’t necessarily the best; it’s all about finding the balance between price and functionality.
Security
It goes without saying how important security is when it comes to the best payroll software, so choosing a provider takes cybersecurity seriously is vital to keeping your businesses information safe. These are the accreditations and standards to look for:
- GDPR compliance
- ISO27001 & ISO9001
- CIPP Payroll Assurance Scheme
- HMRC recognised
- BACS approved bureau
- Cyber Essentials Plus
Record-keeping standards
Good record-keeping isn’t just tidy admin—it’s a legal requirement. HMRC can inspect your payroll records at any time, and if you can’t produce them, you can receive a costly fine. Knowing what to keep, for how long, and in what format is the starting point and a payroll best practice.
What do you need to keep—and for how long?
| Record type | Minimum retention period | Notes |
|---|---|---|
| Payroll records (pay, deductions, NI, tax) | 3 years after tax year end | Paper or digital—must be accessible for HMRC inspection |
| PAYE records (P45s, P60s, starter checklists) | 3 years after tax year end | Must be available on request |
| Pension contribution records | 6 years | Requirement under auto-enrolment regulations |
| Right to work documents | 2 years after employment ends | Original or certified copies |
| Expense and benefit records (P11D data) | 3 years after tax year end | Process will change post-April 2027 mandatory payrolling shift |
| Attachment of earnings orders | Duration of order + 3 years | Keep the original court order and all related correspondence |
Digital vs paper
Most organisations have moved to digital record-keeping. And for good reason. Records stored in payroll software are easier to retrieve and often backed up automatically. This works well when your software is HMRC-recognised and regularly updated. Be aware, though, that records stored in spreadsheets or on local drives carry more risk: they’re easier to overwrite, harder to audit, and much more vulnerable to data loss.
Whatever system you use, records must be legible, complete, and accessible if HMRC comes calling. Encrypted storage and controlled access are good practice for any payroll data, given how sensitive it is.
What changes from April 2027?
The move to mandatory payrolling of benefits in kind from April 2027 will change how some records are kept. Expenses and benefits that previously required a P11D will instead be processed through payroll and reflected in your FPS submissions. That means your payroll software—rather than a separate P11D process—becomes the record of those benefits. If you haven’t already, it’s worth reviewing your record-keeping setup now so you’re ready when the change lands.
Tip: run a records audit once a year, ideally at year-end. Check what you’re holding, confirm retention periods are being met, and securely delete anything you no longer need to keep. It keeps things manageable and reduces data risk.
GDPR and data protection
Under UK GDPR, employees have individual rights granted to them. This covers being informed that you’re collecting and processing their data and your purposes for doing so, how long you’ll keep their data, and who you might share it with. This is known as “privacy information” and when you’re collecting data, you must inform them at the time.
Access their information
Your staff can exercise their right to access any data of theirs you hold (as well as any other information). This request can be made in writing, via social media or verbally and is known as a Subject Access Request (SAR).
Correct inaccuracies
People have the right to have incorrect or inaccurate information about their data changed.
Be forgotten
Your employees can ask to restrict your processing of their data. It’s circumstance-dependent, but gives an individual the right to limit how you use their personal data.
Restrict processing
Your people can ask for their “right to be forgotten.” This is where any data you hold is deleted.
⚠️ Important
Failure to comply with GDPR can lead to substantial fines. Penalties can reach up to £17 million or 4% of your company’s annual turnover.
Your GDPR obligations
Transparency
You must process personal data transparently and lawfully. That means having a clear purpose for collecting the data and storing it correctly.
Collect what you need
You should only collect and process people data that is necessary for payroll processing.
Security
You must have robust security measures in place to protect this data or any risks like data breaches or unauthorised access. This includes secure storage of people data, methods for sharing payroll data like encrypted emails or secure file transfer, and regular audits of your data handling processes.
Worst-case protocols
We all hope the worst-case scenario will never happen, but it’s important to establish protocols in case they do arise. This means outlining the process for notifying the affected employees and the Information Commissioner’s Office (ICO) within the necessary periods.
Payroll calendar
To integrate payroll best practices into your everyday practices, you need to have a clear view of the key dates in the payroll calendar. After all, how else will you know when your final FPS needs to be submitted or the final pay date of the year?
UK tax month
A UK tax month always runs from the 6th of one calendar month to the 5th of the following calendar month. This rule remains constant regardless of weekends or leap years. However, the deadline for paying HMRC shifts depending on the day of the week.
Electronic payments must clear into the HMRC account by the 22nd of the month following the end of the tax month. If the 22nd falls on a weekend or bank holiday, the payment must be cleared by the last working day before the 22nd.
Comprehensive tax month schedule
The following table lists the exact dates for each tax month and the adjusted deadline for electronic payments.
| Tax month | Period covering | Electronic payment deadline | Reason for adjustment |
|---|---|---|---|
| Month 1 | 6 Apr – 5 May 2026 | Friday 22 May 2026 | None |
| Month 2 | 6 May – 5 Jun 2026 | Monday 22 June 2026 | None |
| Month 3 | 6 Jun – 5 Jul 2026 | Wednesday 22 July 2026 | None |
| Month 4 | 6 Jul – 5 Aug 2026 | Friday 21 August 2026 | 22nd is Saturday |
| Month 5 | 6 Aug – 5 Sept 2026 | Tuesday 22 September 2026 | None |
| Month 6 | 6 Sep – 5 Oct 2026 | Thursday 22 October 2026 | None |
| Month 7 | 6 Oct – 5 Nov 2026 | Friday 20 November 2026 | 22nd is Sunday |
| Month 8 | 6 Nov – 5 Dec 2026 | Tuesday 22 December 2026 | None |
| Month 9 | 6 Dec 2026 – 5 Jan 2027 | Friday 22 January 2027 | None |
| Month 10 | 6 Jan – 5 Feb 2027 | Monday 22 February 2027 | None |
| Month 11 | 6 Feb – 5 Mar 2027 | Monday 22 March 2027 | None |
| Month 12 | 6 Mar – 5 Apr 2027 | Thursday 22 April 2027 | None |
UK tax week calendar (2026-2027)
| Tax Week | Dates | Tax Week | Dates |
| Week 1 | 6 Apr – 12 Apr 2026 | Week 27 | 5 Oct – 11 Oct 2026 |
| Week 2 | 13 Apr – 19 Apr 2026 | Week 28 | 12 Oct – 18 Oct 2026 |
| Week 3 | 20 Apr – 26 Apr 2026 | Week 29 | 19 Oct – 25 Oct 2026 |
| Week 4 | 27 Apr – 3 May 2026 | Week 30 | 26 Oct – 1 Nov 2026 |
| Week 5 | 4 May – 10 May 2026 | Week 31 | 2 Nov – 8 Nov 2026 |
| Week 6 | 11 May – 17 May 2026 | Week 32 | 9 Nov – 15 Nov 2026 |
| Week 7 | 18 May – 24 May 2026 | Week 33 | 16 Nov – 22 Nov 2026 |
| Week 8 | 25 May – 31 May 2026 | Week 34 | 23 Nov – 29 Nov 2026 |
| Week 9 | 1 Jun – 7 Jun 2026 | Week 35 | 30 Nov – 6 Dec 2026 |
| Week 10 | 8 Jun – 14 Jun 2026 | Week 36 | 7 Dec – 13 Dec 2026 |
| Week 11 | 15 Jun – 21 Jun 2026 | Week 37 | 14 Dec – 20 Dec 2026 |
| Week 12 | 22 Jun – 28 Jun 2026 | Week 38 | 21 Dec – 27 Dec 2026 |
| Week 13 | 29 Jun – 5 Jul 2026 | Week 39 | 28 Dec 2026 – 3 Jan 2027 |
| Week 14 | 6 Jul – 12 Jul 2026 | Week 40 | 4 Jan – 10 Jan 2027 |
| Week 15 | 13 Jul – 19 Jul 2026 | Week 41 | 11 Jan – 17 Jan 2027 |
| Week 16 | 20 Jul – 26 Jul 2026 | Week 42 | 18 Jan – 24 Jan 2027 |
| Week 17 | 27 Jul – 2 Aug 2026 | Week 43 | 25 Jan – 31 Jan 2027 |
| Week 18 | 3 Aug – 9 Aug 2026 | Week 44 | 1 Feb – 7 Feb 2027 |
| Week 19 | 10 Aug – 16 Aug 2026 | Week 45 | 8 Feb – 14 Feb 2027 |
| Week 20 | 17 Aug – 23 Aug 2026 | Week 46 | 15 Feb – 21 Feb 2027 |
| Week 21 | 24 Aug – 30 Aug 2026 | Week 47 | 22 Feb – 28 Feb 2027 |
| Week 22 | 31 Aug – 6 Sep 2026 | Week 48 | 1 Mar – 7 Mar 2027 |
| Week 23 | 7 Sep – 13 Sep 2026 | Week 49 | 8 Mar – 14 Mar 2027 |
| Week 24 | 14 Sep – 20 Sep 2026 | Week 50 | 15 Mar – 21 Mar 2027 |
| Week 25 | 21 Sep – 27 Sep 2026 | Week 51 | 22 Mar – 28 Mar 2027 |
| Week 26 | 28 Sep – 4 Oct 2026 | Week 52 | 29 Mar – 4 Apr 2027 |
Payroll risks
Payroll errors are usually unintentional. But some risks go beyond honest mistakes, and even those that don’t can still carry serious consequences for your organisation.
The risks below range from internal process failures to external threats. Some are more common in smaller teams; others tend to surface as organisations scale. In most cases, the right combination of controls, software, and clear process design significantly reduces your exposure.
Imagine someone working remotely logs their hours on a shared spreadsheet. One week, they forget to record them and estimate instead—adding a few extra just to be safe. It seems harmless. But over time, these small top-ups add up to significant overpayments. And even when it starts as an oversight, the pattern becomes timekeeping fraud.
Here’s how to reduce the risk:
- Automated time-tracking: removes the need for manual logging and the guesswork that comes with it.
- Manager approvals: a second pair of eyes catches inconsistencies before they become a pattern.
- Regular audits: help spot anyone consistently claiming overtime without clear justification.
- Segregation of duties: one person logs hours, another verifies them making it harder for errors or fraud to slip through unnoticed.
Expense fraud tends to be incremental; a personal meal added to a client dinner receipt, a few extra miles on a mileage claim, or a receipt accidentally submitted twice. Individually, these amounts seem small. Across a team, over the span of a year, they can be significant.
Some steps to implement to avoid this:
- A clear expense policy: employees need to know exactly what’s claimable and what isn’t.
- Receipts for every claim: no receipt equals no reimbursement.
- Regular audits: flag unusual patterns or repeat submissions.
- Expense management software: tools like Capture Expense flag questionable entries and make approvals more robust.
Payroll data is one of the most valuable targets for cybercriminals. It contains salaries, bank details, and National Insurance numbers for every employee in your organisation. A convincing phishing email that appears to come from a senior colleague is often all it takes. One reply with a payroll file attached, and that data is compromised.
Luckily, there are multiple different steps you can take to mitigate cybersecurity threats:
- Encryption and multi-factor authentication (MFA): even if files are intercepted, they can’t be read without the right credentials.
- Access controls: only authorised people should be able to view or edit payroll data.
- Staff training: teach your team to spot phishing emails and question unexpected requests, even from familiar names.
Payroll legislation changes more often than most people expect—spanning from tax bands and NI thresholds to statutory payment rates and auto-enrolment rules. Missing an update and continuing to process on old figures isn’t just an admin error; it’s a compliance risk that could have easily been avoided.
HMRC can flag any legislation errors during routine checks, resulting in back payments, potential fines, and damage to employee trust.
How to stay on top:
- Regular reviews: schedule periodic audits of your processes to catch anything that’s drifted out of date.
- Expert support: payroll consultants and legal advisers track legislative changes, so you don’t have to.
- Up-to-date software: a platform like Cintra People updates automatically in line with the latest rules, reducing the risk of compliance gaps.
In a lot of organisations, one person holds all the payroll knowledge—the logins, the process, the quirks of the system. That’s fine until they’re unexpectedly unavailable. When that happens on a payroll deadline, the consequences are immediate: delayed pay, frustrated employees, and a scramble to work out how anything gets done.
Here’s how to manage it:
- Crosstrain at least one other person: they don’t need to be an expert—but having a working understanding is enough to bridge a gap in knowledge.
- Document everything: step-by-step guides, securely stored login details, and checklists make a real difference when someone needs to step in.
- Consider outsourcing: with Cintra’s payroll outsourcing services, a dedicated team keeps payroll running accurately and on time—regardless of what’s happening internally.
- BCP/emergence payroll: need someone to hop in at a moment’s notice? Emergency payroll gives you the backup you need whenever you need it; you simply keep a company on retainer to jump in when (or if) you need it.
Streamlining processes
A lot of payroll effort goes into things that simply don’t need to be manual. The more you can automate, standardise, and document, the less time payroll takes and the fewer opportunities there are for errors to creep in. Here’s where to focus.
Automate what you can
Connecting your HR system, time-tracking software, and payroll platform means that all your people data flows through automatically, creating a single source of truth on your people. Most modern payroll platforms support integrations with time and attendance tools, HR systems, and expense management software or offer an all-in-one system (like Cintra People), that combines HR and payroll directly at the source. This isn’t just an integrated platform, but a single system for all of your people data.
This works well when your systems talk to each other cleanly. Be aware, though, that integrations need to be maintained: a software update on one platform can sometimes break a connection, so it’s worth checking data flows regularly rather than assuming they’re running smoothly.
Build a payroll process document
A lot of organisations run payroll from memory, especially in smaller teams. That’s a risk. Documenting the process step by step (who does what, when, and in what system), makes it repeatable, auditable, and much easier to hand over if someone is unavailable. It doesn’t have to be long; a clear, up-to-date checklist is worth more than a lengthy guide nobody reads.
Run pre-payroll checks
Before processing each pay run, a short checklist catches most errors before they happen. It only takes a few minutes, but it can save hours of corrections. The key questions to ask before every run:
- Are there any new starters or leavers to process?
- Are there any changes to hours, salary, or contract terms?
- Are any statutory payments due (SSP, SMP, SPP)?
- Any changes to deductions (new student loan notifications, updated NI categories)?
- Any expenses or benefits to include?
Review and audit regularly
Payroll that runs without issues tends to run without scrutiny—which is how small errors build over time. A quarterly review of deductions, NI categories, pension contributions, and expense processing helps catch anything that’s drifted. It works best when someone independent of the day-to-day run carries out the review, since a fresh pair of eyes spots things that familiarity misses.
Consider managed payroll
For smaller teams, or organisations going through growth or change, outsourcing payroll is worth considering. It removes the operational burden, brings in specialist knowledge, and means you’re covered if your internal resource is unavailable.
Still unsure if it’s right for you? Here are the benefits of outsourcing your payroll:
- A dedicated team: With managed payroll, you have a team of experienced payroll experts at your fingertips. That takes considerable stress away from your teams; no more scrambling when someone is on annual leave or trying to stay up to date with ever-changing legislation.
- Efficiency: With outsourced payroll, you benefit from state-of-the-art software and expertise, helping to reduce the number of mistakes and improving the efficiency of your payroll run overall.
- Cost savings: Put simply, the right provider should save you money. While you will have to pay for the outsourcing service, you save on employing and training your own payroll staff—which can easily add up.
- Time: Outsourcing your payroll frees up your time and resources. Without the need to juggle spreadsheets or manually reconcile data, you allow your people to put effort into your core business instead.
- Flexibility and scalability: No matter what happens in your organisation, payroll outsourcing can move with you. It can grow as you do, or it can shift in line with any of your changes.
Fully managed payroll you can trust
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Preparing for payroll year-end
Closing out the tax year is stressful for any business. For many, it’s a scramble to get your finances in order and fulfil any obligations before April 6th. But how do you prepare for payroll year-end without draining time, morale, and potentially your finances?
We’ll cover everything you need to know to close the year compliantly, including the records you need to collect and anything you need to submit to avoid potential penalties and maximise your efficiency in the new year.
Phase 1: Prepare
Most of the hard work for year-end happens before the year closes. It’s good practice to use February and March to get your records in order so that April is as straightforward as possible.
Reconcile your payroll records
Before you close the year, check that the data in your payroll software matches what HMRC holds. Your year-to-date figures for tax, National Insurance, and statutory payments should align with the submissions you’ve made throughout the year via Real Time Information (RTI). If there are discrepancies, it’s much easier to resolve them now than after the year has closed.
Cross-check your P32 (Employer Payment Record) against your HMRC account. This shows what you’ve paid across the year and flags anything outstanding.
Review employee records
Work through your employee list and check the following before the year ends:
- Leavers: confirm all leavers have been processed correctly and P45s issued. Anyone still showing as active who has left will cause problems at year-end.
- Tax codes: check for anyone still on an emergency tax code or a code that looks incorrect. HMRC will issue updated P9 notices ahead of the new tax year, but it’s worth reviewing now.
- Statutory leave: make sure anyone on maternity, paternity, or shared parental leave has been processed correctly throughout the year, including any SMP or SPP reclaimed via the EPS.
- Student loans: confirm the correct plan is recorded for each employee and that deductions have been applied consistently.
- Directors: NI for directors is calculated on an annual basis, so check the cumulative figures are correct before year-end.
Capture all expenses and benefits
If you’re completing P11D forms (required for 2026/27), now is the time to gather the information you’ll need. Go through your records and identify every employee or director who received a benefit in kind during the year—that includes company cars, private medical insurance, interest-free loans over £10,000, gym memberships, accommodation, and so on.
For each benefit, check whether it was payrolled (in which case it doesn’t need a P11D) or processed outside of payroll (in which case it does). Keep a clear record of both, as you’ll still need to submit a P11D(b) to report Class 1A National Insurance even where benefits were payrolled.
Worth noting: 2026/27 is the last tax year P11D forms are required for most benefits. From April 2027, all benefits in kind must be payrolled. If you’re not already set up for this, speak to your software provider now and avoid leaving it until April.
Check pension contributions
Reconcile your pension contributions for the year. Confirm that auto-enrolment ran correctly for every eligible employee in every pay period, that the right contribution rates were applied, and that everything has been paid to the pension provider on time. If you find any gaps, contact your provider before year-end to agree how to correct them.
Review any outstanding HMRC notices or queries
Check your PAYE Online account for any unresolved notices, late filing warnings, or queries from HMRC. It’s better to address these before the year closes rather than carry them into the new year.
Phase 2: Submit
Once March payroll is done, you move into the closing sequence where you’ll submit your final submissions for the year. Here’s what needs to happen and when in a handy end of year payroll checklist.
| Deadline | What's required |
|---|---|
| 5 April 2027 | Process your final payroll and submit your final FPS—marked as 'Final submission for year'. If you realise you've made an error after submitting, you can send an additional FPS but do it before 19 April. |
| 19 April 2027 | Submit your final EPS. This is your last chance to claim Employment Allowance, recover any statutory payments (SMP, SPP, SAP), or report any adjustments for 2026–27. Any statutory payment recoveries or Employment Allowance claims not included in the final EPS cannot be reclaimed for 2026–27. |
| 31 May 2027 | Issue P60 forms to all employees on payroll as of 5 April 2027 (paper or electronic). Don't forget employees on long-term leave; if they're still employed on 5 April, they must receive a P60, even if their pay was £0 for most of the year. |
| 6 July 2027 | Submit P11D forms for expenses and benefits in kind not processed through payroll. This is the last year P11D forms are required for most benefits, mandatory payrolling of benefits will take effect from April 2027. Use this year-end to make sure you’re set up for the change. |
| 19 July 2027 | Pay Class 1A National Insurance by cheque. |
| 22 July 2027 | Pay Class 1A National Insurance electronically. |
Phase 3: Set up the new year
Payroll year-end isn’t finished until the new tax year is ready to run. Before you process your first payroll, you should work through the following.
Apply new tax codes
HMRC issues updated tax codes ahead of the new tax year via P9 notices (bulk code changes) and P6 notices (individual changes), both available through PAYE Online. Most payroll software picks these up automatically, but it’s worth confirming they’ve been applied before you run your April payroll. Any employee still on the wrong code from the previous year will be taxed incorrectly from day one (which no one wants!).
Update statutory rates and thresholds
A number of rates and thresholds typically change on 6 April each year. Before running your first payroll, make sure your software has been updated with the new figures for:
- National Living Wage and National Minimum Wage
- Income tax bands and personal allowances
- National Insurance thresholds and category rates
- Statutory payment rates (SSP, SMP, SPP, SAP)
- Pension qualifying earnings thresholds
- Student loan repayment thresholds (by plan)
Most payroll software will update these automatically, but it’s good practice to confirm rather than assume, especially if you’re using older or less frequently updated systems.
Prepare for mandatory payrolling of benefits
From 6 April 2027, payrolling benefits in kind becomes mandatory for most employers. If you’ve been reporting benefits via P11D forms up to now, you’ll need to register with HMRC to payroll benefits and configure your payroll software to include them in your FPS from April 2027 onwards. This isn’t something to set up at the last minute; the registration process needs to be completed before the start of the tax year.
If you haven’t already registered to payroll benefits, it’s best to do so now via PAYE Online as registration for 2027/28 needs to be in place before 6 April 2027. Your software provider should be able to walk you through the configuration.
Reset and confirm year-to-date figures
Your payroll software should automatically reset year-to-date figures when you open the new tax year. Confirm this has happened correctly before processing April payroll. If your YTD figures carry over from the previous year, your tax and NI calculations will be wrong from the start.
Communicate with your employees
Let your people know when to expect their P60. This should ideally be a note explaining what it’s for and how to access it (particularly if you issue them electronically). If any employees query their P60 figures, have a process in place to review and respond quickly. It’s also worth flagging the move to payrolled benefits if it affects what employees will see on their payslips from April 2027 onwards—unexpected changes to payslip deductions generate a lot of unnecessary queries.
Year-end is one of those processes that gets easier every time you do it well. With clear preparation, the right software, and the steps above in your diary, it’s very manageable.
Book a demo
Year-end doesn't have to be stressful. With the right system and clear processes in place, it's just a checklist. If you'd like to see how Cintra can help you manage payroll with confidence all year round, we'd be happy to walk you through it.
Payroll checklists
To put payroll best practices into action, here’s a quick reference covering the main areas to stay on top of.
Employee data
All of the following must be accurate and up to date:
- Name, address, bank details
- Employee or payroll ID
- Employment status (worker, employee, contractor, director, or office holder)
- Right to work documentation (non-UK citizens)
- Student loan plan and deduction amounts
- National Insurance category
- IR35 status for contractors, plus a Status Determination Statement (SDS) where required
- New starters: P45 from previous employer and completed HMRC starter checklist
- Leavers: final pay confirmed and P45 issued
Pay and statutory payments
For each of the below, you’ll need to be clear on both your organisation’s own policies and the statutory rules and rates:
- Salary or hourly rate, overtime terms, and holiday pay
- National Living Wage and National Minimum Wage compliance
- Statutory Sick Pay (SSP), and all parental leave payments (SMP, SPP, SAP, SSPP, SPBP)
- Expense reimbursements, with tax applied where required
Deductions
Each of the following must be carefully checked and kept up to date:
- Income tax with the correct band and personal allowance applied
- National Insurance, making sure the category letter is correct for each employee
- Student loan(s), making sure the correct plana and rate is assigned to necessary employees
- Salary sacrifice; this must not take anyone below National Minimum Wage
- Attachment of earnings orders
- Pension contributions including the correct rate so you’re compliant with auto-enrolment rules
Reporting to HMRC
Employers must keep HMRC informed on the following:
- Full Payment Submission (FPS) every payday via Real Time Information (RTI)
- Employer Payment Summary (EPS) where applicable
- P60s to all employees by 31 May
- P11D (or payrolled benefits equivalent) to HMRC by 6 July
- Gender pay gap report published annually for organisations with 250 or more employees
Cintra People: the best payroll practices, every time
At Cintra, the payroll best practices are our bare minimum. Find out more about how our software, Cintra People, can help you with efficient, accurate payroll every time.
