HMRC Payroll: Key Information Every Employer Needs

Managing payroll can feel overwhelming, especially as your team grows. But getting it right is essential to avoid fines and ensure employees are paid accurately and on time.

From submitting Real Time Information (RTI) to deducting PAYE and National Insurance, HMRC payroll compliance is a legal must for every UK employer.

This guide breaks down the core payroll responsibilities, so you can stay compliant, avoid penalties, and focus on growing your business without the jargon.

What Documents Do You Need for HMRC Payroll Compliance?

When it comes to HMRC payroll compliance, paperwork isn’t just admin, it’s your safety net. Whether you’re setting up payroll for the first time or running a growing team, accurate records are non-negotiable.

Here’s what you need to keep in order:

• Employee information: Full name, address, date of birth, National Insurance number, and start date.
• P45 or P46 (Starter Checklist): For new employees to report previous income and tax details.
• Employment contract: To confirm pay structure, hours, and benefits.
• Payroll records: Gross pay, deductions (PAYE, National Insurance, pensions), and net pay.
• Payslips: Issued to employees on a regular pay period.
• RTI submissions: Records of what’s reported to HMRC each time you run payroll.

What payroll information do I need to report to HMRC?

When running HMRC payroll, reporting accurate information is key. Every time you pay your employees, you’re required to submit payroll data to HMRC using Real Time Information (RTI). This includes two main types of reports: the Full Payment Submission (FPS) and, if needed, the Employer Payment Summary (EPS). Both help HMRC’s payroll systems stay up to date with what you owe and what has been paid.

What to include in a Full Payment Submission (FPS)?

The Full Payment Submission (FPS) is the main report employers send to HMRC every time they pay an employee. It’s a key part of the Real Time Information (RTI) system, which ensures HMRC receives up-to-date payroll data throughout the tax year, not just at year-end.

Submitting your FPS accurately and on time is crucial for maintaining compliance and avoiding penalties.

Here’s what an FPS includes:

• Employee Details: This section provides the employee’s full name, National Insurance number, and tax code, which HMRC uses to track their tax and contributions accurately.
• Gross Pay and Net Pay: Gross pay refers to the total amount before any deductions. Net pay is the amount an employee receives after tax, National Insurance, and other deductions are applied.
• Income Tax and National Insurance Deductions: The FPS reports the amount of Income Tax and National Insurance deducted from each employee’s pay, based on their earnings and tax code.
• Statutory Payments: This includes payments such as Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), or Paternity Pay, which must be reported when applicable.
• Pension Contributions: If your employees are enrolled in a workplace pension, the FPS details the contributions made by both the employer and the employee.
• Student Loan Repayments: If an employee is repaying a student loan, the FPS includes the amount deducted from their salary during that pay period.

What to include in an Employer Payment Summary (EPS)?

The Employer Payment Summary (EPS) is a report sent to HMRC when you need to provide payroll information not included in your FPS. Unlike the FPS, which is sent every time you pay an employee, the EPS is only required in certain situations—usually when you’re making adjustments, claiming reliefs, or reporting zero payments.

Submitting an EPS ensures your PAYE bill is accurate and reflects any reductions or changes in liability.

Here’s when you’d need to submit an EPS:

• No Employees Paid in a Period: If you didn’t pay any employees during a specific pay period, you must notify HMRC via an EPS to avoid being charged a penalty for missing an FPS.
• Reclaiming Statutory Payments: Use the EPS to claim back Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), or Statutory Sick Pay (SSP) if your business is entitled to reclaim these amounts.
• Claiming Employment Allowance or CIS Deductions: If you’re eligible for Employment Allowance (which reduces your employer’s National Insurance bill) or you’re reclaiming CIS deductions suffered as a subcontractor, report it through the EPS.
• Reporting Corrections or Late Submissions: Use the EPS to explain why an FPS was submitted late or to report corrections that can’t be amended via the FPS alone, ensuring your records are compliant and transparent.

What are the Essential Steps in the Payroll Process?

Running payroll might seem like just pushing a few buttons, but there’s a structured process behind every payslip. Whether you’re handling it in-house or using software, understanding the key steps helps you stay compliant and avoid HMRC payroll errors.

Here’s how the payroll process typically works:

Step 1: Collect and Maintain Employee Information

Before running your first payroll, ensure you have complete and accurate records for each employee. This includes:

• Full name and address
• Date of birth
• National Insurance number
• Tax code and student loan status
• Bank details for salary payments
• Right to work documentation

Keeping this data updated ensures smooth payroll HMRC submissions and accurate pay.

Step 2: Calculate Pay and Statutory Deductions

Every pay period, you’ll need to calculate:

• Gross pay – based on hours worked, salary, bonuses, or commissions
• Deductions – including Income Tax, National Insurance, pension contributions, student loans, and statutory payments like SMP or SSP

Accurate calculations are crucial for staying aligned with HMRC payroll rules and avoiding under- or overpaying your employees.

Step 3: Generate and Issue Payslips

Payslips must be given to employees every time they’re paid. These should clearly show:

• Gross pay
• All deductions
• Net pay (what they take home)
• Pay period dates
• Employer name and tax details

Most payroll software will handle this automatically, but accuracy remains your responsibility.

Step 4: Submit FPS to HMRC (Full Payment Submission)

Each time you run payroll, you must submit a Full Payment Submission (FPS) to HMRC, on or before the payment date. The FPS includes:

• Employee earnings
• Tax and NI deducted
• Statutory payments
• Student loan and pension details

This is one of the most essential HMRC payroll tasks and must be completed on time to avoid penalties.

Step 5: Pay Employees

Once everything is calculated and reported, it’s time to pay your staff. Ensure payments match payslip details and go out on the correct date to maintain trust and avoid complaints.

Step 6: Pay HMRC

Each month or quarter, you’ll need to pay HMRC for the deductions made from employee pay:

• PAYE tax
• National Insurance contributions (employee and employer)
• Student loans and other statutory deductions

Always check payment deadlines and allow time for processing.

Step 7: Maintain Payroll Records

To stay HMRC payroll compliant, keep detailed records for at least 3 years, including:

• Payroll reports
• Payslips
• Tax code notices
• Payment summaries (FPS, EPS)
• P45s, P60s, and employee correspondence

Good record-keeping protects you in case of audits and makes future reporting easier.

How Do You Register for HMRC Payroll as an Employer?

Becoming an employer in the UK involves taking on legal responsibilities, including registering with HMRC for payroll purposes. Whether you’re hiring your first employee or switching from self-employment to limited company status, registering with HMRC is a key step to staying compliant with HMRC payroll rules.

Here’s a detailed breakdown of the process to help you get started confidently:

Step 1: Determine If You Need to Register

You must register for HMRC payroll if you:

• Pay employees (or yourself, as a director) more than £123/week (2025 threshold)
• Provide expenses or benefits
• Use PAYE tax codes or deductions like National Insurance

Step 2: Register as an Employer with HMRC

To start, you’ll need to register online via the HMRC website. You can do this:

• Up to 2 months before your first payday
• Using your Government Gateway account (or you can create one during registration)

HMRC will then issue you:

• An Employer PAYE Reference
• An Accounts Office Reference

Step 3: Choose Your Payroll Setup

Once registered, decide how you’ll manage payroll. You have three main options:

• Payroll software (recommended for most businesses)
• Accountant or payroll service
• Manual submissions (not advised unless you have straightforward payroll needs)

Step 4: Add Employees and Start Running Payroll

After setup, you’ll need to:

• Collect employee details (name, NI number, tax code, etc.)
• Send your first Full Payment Submission (FPS) to HMRC on or before payday
• Keep accurate payroll records for compliance and year-end reporting

Step 5: Stay Compliant Going Forward

Once registered, your ongoing payroll HMRC responsibilities include:

• Monthly/quarterly PAYE payments to HMRC
• Issuing payslips
• Keeping records for at least 3 years
• Submitting annual forms like P60s and P11Ds
• Notifying HMRC when employees leave (via a P45)

How Do You Calculate and Report Employee Deductions?

When running HMRC payroll, one of your most important responsibilities as an employer is to calculate and report employee deductions accurately. These include Income Tax, National Insurance, student loan repayments, and pension contributions. Getting this wrong can lead to underpayments, penalties, or unhappy employees.

Here’s a detailed breakdown of how to handle deductions the right way:

1. Understand What Deductions You Need to Make

Before processing payroll, know which deductions apply to each employee. These may include:

• Income Tax (PAYE) – Based on the employee’s tax code and earnings.
• National Insurance (NI) – Both employee and employer contributions.
• Student Loan Repayments – If HMRC notifies you to start deductions.
• Pension Contributions – Required if your employee is enrolled in a workplace pension.
• Other Deductions – Such as court orders, child maintenance, or salary sacrifice.

These are all part of the regular payroll HMRC process and must be handled accurately each pay period.

2. Use Payroll Software or HMRC Tools

Calculating deductions manually is risky and time-consuming. Instead, use:

• HMRC-recognised payroll software – It calculates deductions automatically and helps you stay compliant.
• HMRC’s Basic PAYE Tools – A free option for smaller businesses with simple payroll needs.

These tools handle tax thresholds, NI categories, and student loan plans, making your HMRC payroll job much more manageable.

3. Report Deductions in Your FPS

Every time you pay employees, you’ll need to submit a Full Payment Submission (FPS) to HMRC. This includes:

• Total gross pay
• Amount of PAYE tax deducted
• National Insurance contributions (employee + employer)
• Pension deductions
• Student loan repayments
• Any other relevant deductions

Submitting the FPS on or before payday ensures your payroll HMRC data is up to date and compliant.

4. Pay HMRC On Time

Once deductions are made, you must:

• Pay HMRC monthly or quarterly, depending on your size
• Use your Accounts Office Reference when making payments
• Include all PAYE, NI, and other deductions in one payment

Staying on top of this avoids interest charges and keeps your HMRC payroll record accurate and up to date.

5. Keep Clear Payroll Records

Always keep a record of:

• How deductions were calculated
• What was reported to HMRC
• Proof of payments made to HMRC
• Payslips and payroll reports

Simplify Payroll with Direct Payroll Services

Struggling to stay on top of payroll tasks, HMRC rules, and reporting deadlines? Let DirectPayrollServices take it from here.

We handle everything—from calculating deductions and submitting FPS/EPS reports to ensuring full HMRC compliance—so you never miss a deadline or risk a penalty. Whether you’re hiring your first employee or managing a growing team, our expert payroll support gives you more time to focus on what matters: running and scaling your business.

Conclusion

Payroll doesn’t have to be complicated or stressful. With the right systems, up-to-date knowledge, and clear responsibilities, you can manage payroll confidently, no matter the size of your business.

From registering with HMRC to submitting FPS and EPS reports, calculating PAYE and National Insurance, and staying aligned with the tax calendar, each step plays a crucial role in ensuring your business remains compliant. Payroll mistakes can lead to penalties, delays, and unhappy employees, but with the right support, those risks disappear.

Whether you’re a first-time employer, scaling fast, or simply tired of juggling deductions and deadlines, staying on top of your HMRC payroll obligations is crucial to running a smooth, professional operation.

Frequently Asked Questions

How do I contact HMRC payroll?

For any payroll questions, you can contact HMRC using the tax calendar. This is set up to match monthly reporting dates. HMRC has a helpline that can assist with PAYE-related questions. This help covers deductions, payday details, and assists if you encounter issues with your accountant. For the most recent updates about the tax month, check their official UK website.

What is HMRC payroll?

HMRC payroll allows employers to deduct taxes, such as income tax and national insurance, when they pay their workers. They do this by using approved payroll software. When you pay your team, you send payroll details along with an FPS form. For changes, you send an EPS form. All of this is managed on the RTI system.

What is the HMRC tool for payroll?

The Basic PAYE Tools from HMRC help employers run payroll and easily manage PAYE tasks. With these tools, you can use the tax calendar and keep up-to-date for RTI submissions. The Basic PAYE Tools work out deductions for each worker and help you follow rules for FPS and EPS reports.

How does the HMRC tax calendar work?

The HMRC tax calendar marks the start of a new tax year on 6 April. This calendar outlines important dates for each tax month. You get to see the deadlines for things like FPS and other submissions. When you follow the HMRC tax calendar, you keep up with RTI rules and make sure each submission is sent on time. This way, you do not miss any key dates in the tax year.

Do I need to tell HMRC if I get a pay rise?

HMRC needs to be informed about any pay raises by receiving updates through FPS submissions. They use this to change income tax and national insurance deductions on their own. These changes are made on the employee’s payday to coincide with the tax year.