United Kingdom

Overview

UK payroll runs through PAYE (Pay As You Earn) in pound sterling (£): employers deduct Income Tax and National Insurance from pay and remit to HMRC. The distinctive feature is the maturity of Real Time Information (RTI) — since 2013, employers report pay and deductions to HMRC on or before each payday, electronically, rather than annually. PAYE, National Insurance, statutory leave pay and workplace-pension auto-enrolment make the employer the primary collection and compliance agent.

Payroll cycle & pay dates

Monthly is most common for salaried staff; weekly, fortnightly and four-weekly are common for hourly/shift workers. There is no single statutory payday, but pay frequency must appear in the written statement of particulars. Employers must give an itemised payslip on or before payday (printed or electronic), showing gross and net pay, variable deductions (tax, NI), and hours where pay varies by time. gov.uk — Payslips.

Income tax / withholding (PAYE)

Income Tax is withheld in real time against the employee's tax code, which HMRC issues to set the tax-free allowance. Standard Personal Allowance £12,570, standard code 1257L (2026/27). For England & Northern Ireland: 20% basic, 40% higher, 45% additional; Scotland and Wales set their own rates/bands (Scotland has six bands in 2026/27). The tax year runs 6 April – 5 April, and codes drive cumulative withholding to reach the correct annual tax. gov.uk — Income Tax rates · Tax codes · HMRC rates & thresholds 2026/27.

Social security & statutory contributions

• National Insurance (NICs): split employee (primary) / employer (secondary) by category letter (most employees = A). 2026/27: employees pay 8% between the Primary Threshold (£242/wk) and Upper Earnings Limit (£967/wk; £50,270/yr), then 2%; employers pay 15% above the Secondary Threshold (£96/wk; £5,000/yr). An Employment Allowance (£10,500, 2026/27) can reduce eligible employers' bill. NI rates & categories.
• Workplace pension (auto-enrolment): enrol eligible jobholders into a qualifying scheme; minimum 8% of qualifying earnings, of which ≥3% from the employer (rates from 6 April 2019). The Pensions Regulator.

Mandatory benefits & leave

• Holiday: 5.6 weeks paid statutory leave (28 days for a 5-day week, capped at 28); bank holidays may count within this. gov.uk — Holiday entitlement.
• Statutory Sick Pay (SSP): £123.25/week (or 80% of AWE if lower), up to 28 weeks (2026/27).
• Statutory parental pay: SMP = 90% of AWE for 6 weeks, then £194.32/week (or 90% if lower) for up to 33 more weeks; Statutory Paternity / Shared Parental Pay £194.32/week (or 90% if lower). (See double-check note.)
• National Minimum / Living Wage (from 1 Apr 2026): £12.71 (21+, NLW), £10.85 (18–20), £8.00 (under-18 & apprentice). gov.uk — NMW rates.
• Notice: statutory minimum ≥1 week after 1 month's service, +1 week per full year up to 12 weeks.

Employer registration & compliance

Register for PAYE with HMRC before the first payday to get an employer PAYE reference. gov.uk — Register as an employer. Each pay run, software submits a Full Payment Submission (FPS) on or before payday; an Employer Payment Summary (EPS) by the 19th of the following tax month reclaims statutory pay or reports nil. Forms: P60 (annual), P45 (on leaving), P11D (benefits in kind). PAYE/NIC paid to HMRC by the 22nd of the following month (19th if by post). Auto-enrolment duties include enrolling staff, paying contributions, and re-declaring compliance. Late/missing FPS/EPS and late payment trigger HMRC penalties. gov.uk — Running payroll.

Common pitfalls

• Emergency tax codes (1257L W1/M1/X) on new starters without a P45 — non-cumulative, can over/under-deduct until corrected.
• RTI "on or before" rule — the FPS must reach HMRC on/by payday; routine lateness risks penalties and disrupts employees' Universal Credit.
• Holiday pay for irregular-hours / part-year workers — entitlement accrues on hours actually worked (from leave years on/after 1 Apr 2024); a frequent calc error.
• Auto-enrolment cyclical re-enrolment — re-enrol previously-opted-out eligible staff ~every three years and re-declare.
• Off-payroll working (IR35) — engaging contractors via PSCs may shift status determination + PAYE/NIC to medium/large clients.
• Wrong NI category letter (under-21s, apprentices under 25, state pensioners) causes incorrect employer NIC.

Official resources

• GOV.UK — PAYE for employers — operating PAYE.
• GOV.UK — Running payroll — RTI (FPS/EPS) and payment deadlines.
• HMRC — Rates & thresholds for employers 2026/27 — master figures for tax, NI, statutory pay, NMW.
• GOV.UK — National Insurance rates & categories — NIC rates and category letters.
• GOV.UK — Minimum wage rates — current/historic wage floors.
• The Pensions Regulator — Contributions & funding — auto-enrolment minimums.