Payroll in the United Kingdom means calculating gross-to-net salary, deducting income tax through PAYE and 8% National Insurance from each employee, paying 15% employer National Insurance on top, issuing payslips and reporting every run to HMRC through a Full Payment Submission on or before payday. The key local issue is timing: the UK files in real time, so the report has to reach HMRC on or before the day you pay people, not at month end, which leaves no room for a late or sloppy run.
Total employer cost for a £40,000 annual salary is about £45,250, around 13% on top of gross.
Our verdict: Fewer than 2 employees and no local entity in United Kingdom: use an EOR at $199 to $599 per employee per month. At 2 or more, opening a Ltd (roughly $3,750 in setup costs and 8 to 16 weeks to complete) usually works out cheaper. Already running a local entity: standard payroll outsourcing is the cheaper route.
Use this page if you already have, or plan to set up, a UK entity and want to know what running payroll actually involves. If you want to hire in the UK without becoming the legal employer, an Employer of Record is the faster route.
No UK entity yet? See our guide to EOR in the UK.
Payroll in the United Kingdom at a Glance
| Payroll cycle | Monthly |
| Employer contribution | 15.0% employer NIC |
| Employee deductions | 8.0% National Insurance |
| Income tax | Progressive 20-45% (PAYE) |
| Main payroll filing | Full Payment Submission (FPS) under Real Time Information |
| Filing deadline | On or before the employee’s payday |
| Employee register | Real Time Information (RTI) reporting to HMRC; no separate national employee register |
| Payslips required | Yes |
| Entity required | Yes for standard payroll; no if using an EOR |
| Main authority | HMRC (His Majesty’s Revenue and Customs) |
How Does Payroll Work in the United Kingdom?
UK payroll runs on a steady monthly rhythm. You calculate each employee’s gross salary, strip out their income tax and National Insurance to reach net pay, add the employer National Insurance charge on top, then report the whole run to the tax authority on or before the day you pay them.
That tax authority is HMRC, His Majesty’s Revenue and Customs. It is the body that collects income tax and National Insurance and that audits employers when the numbers do not line up. Almost everything in UK payroll eventually reports to HMRC.
The income tax sits inside a system called PAYE, short for Pay As You Earn. PAYE means you deduct the right income tax from each payslip as you go, rather than the employee settling a bill at year end. Each worker carries a tax code that tells your software how much of their pay is tax-free before deductions start.
National Insurance is the UK’s main social contribution, funding the state pension and parts of the benefits and health system. There are two sides to it: a slice you withhold from the employee, and a separate charge you pay as employer on top of their gross salary.
The reporting runs through Real Time Information, or RTI. RTI is the rule that you tell HMRC about pay and deductions every time you run payroll, through a Full Payment Submission, or FPS. The FPS is the single filing that carries the whole run, and it has to reach HMRC on or before payday.
Get the tax code, the National Insurance bands or the timing wrong and two things break at once: the employee’s take-home pay is incorrect, and your real-time filing to HMRC no longer matches what you paid.
One more deduction often rides alongside payroll without being a tax. Auto-enrolment pension means most employers must enrol eligible staff into a workplace pension, with the employee and employer each paying in. It sits in the payroll run but is a pension contribution, not a tax, and we keep it out of the worked example below.
What Payroll Taxes Apply in the United Kingdom?
Three charges sit on every UK salary: the employer’s National Insurance, the employee’s National Insurance, and income tax collected through PAYE. They are calculated in a fixed order, and that order is what makes the gross-to-net result.
Employer Payroll Contributions in the United Kingdom
The employer pays National Insurance at 15% on the part of each employee’s earnings above the £5,000 secondary threshold. This is a charge on top of gross salary, separate from anything you withhold from the employee, and it is the main statutory cost of employing someone in the UK.
For most salaried staff this is your largest employer add-on. It is why the total cost of a hire always runs meaningfully above the headline salary, and why you budget on total employer cost rather than gross.
Auto-enrolment pension usually adds a further employer cost of 3% of qualifying earnings, but that is a pension contribution rather than a tax. We treat it separately because it does not flow to HMRC as a payroll tax and is not part of the worked example.
The true cost of employing in United Kingdom
| Employer contribution | Rate |
|---|---|
| Pension | 3% of qualifying earnings |
| Apprenticeship Levy | 0.5% of annual pay bill |
| Total employer burden | 15% of earnings above the GBP 5,000 secondary threshold |
Statutory employer rates; items can apply to different wage bases or carry conditions, so lines do not always sum to the total.
United Kingdom has no statutory 13th-month, holiday or profit-sharing bonus.
Sources: taxsummaries.pwc.com (employer contributions), acas.org.uk (bonuses).
Employee Payroll Deductions in the United Kingdom
You withhold National Insurance from the employee at 8% on earnings between £12,570 and £50,270, then 2% on anything above that upper limit. It comes off gross pay alongside income tax, and you are responsible for calculating, withholding and remitting it.
Employees on auto-enrolment also have a pension contribution of 5% of qualifying earnings deducted, but again that is a pension payment, not a tax. If your provider miscalculates National Insurance, the employee is underpaid or overpaid and your FPS will not reconcile against what you sent to HMRC.
Income Tax on Salary in the United Kingdom
Income tax is collected through PAYE on a progressive scale. The first £12,570 is the personal allowance, the slice of annual pay that is tax-free, after which earnings are taxed at 20%, then 40%, then 45% as pay rises through the bands.
The personal allowance is the figure that does most of the work in a gross-to-net calculation, so a wrong tax code is the most common cause of an incorrect payslip. One important regional note: Scotland sets its own income tax bands and rates, so a Scottish employee’s tax differs from the rest of the UK even on the same salary.
Payroll Tax Example: Gross Salary to Net Pay
Here is how the charges stack up for a representative salary. The figures come from the contribution and tax rates above, calculated in the statutory order.
| Gross annual salary | £40,000 |
| Employee National Insurance (8%) | − £2,194 |
| Taxable income | £27,430 |
| Income tax | − £5,486 |
| Estimated net salary | £32,320 |
| Employer National Insurance (15%) | + £5,250 |
| Total employer cost | £45,250 |
Simplified illustration: 2025/26 rest-of-UK rates with the full GBP 12,570 personal allowance (Scotland sets its own bands), National Insurance the only employee social contribution, excluding auto-enrolment pension and the apprenticeship levy. Taxable income shown is after the personal allowance. GBP 12,570 tax-free for 2025/26; tapers away between GBP 100,000 and GBP 125,140.
Read the two bold rows together. A worker on £40,000 gross takes home £32,320, while your total cost as employer is £45,250.
The gap on the employee side is moderate; the gap between gross and your cost is the employer National Insurance loading. That is the UK payroll signature: budget on the £45,250, not the £40,000, and remember Scotland would shift the income tax line.
What Payroll Filings Are Required in the United Kingdom?
The UK reports payroll in real time rather than in a single monthly return, which is unusual compared with countries that batch everything at month end. The filing that carries it is the Full Payment Submission, or FPS, and it is the centre of your compliance month.
What the FPS Reports
The Full Payment Submission is the report you send to HMRC every time you run payroll, listing each employee’s pay, income tax, National Insurance and other deductions. In one submission it tells HMRC what each person earned and what you withheld for the whole workforce.
Because it is sent in real time, it has to reconcile with your actual payroll run and the payments you make to HMRC. HMRC cross-checks these, and a mismatch is a common trigger for a payroll query.
When the FPS Is Due
The FPS is due on or before each employee’s payday. There is no grace period to the end of the month: if you pay on the 25th, the submission has to reach HMRC on or before the 25th. The related tax and National Insurance are then paid to HMRC by the 22nd of the following month.
Who Files It
The legal obligation sits with the employer. In practice, your payroll provider submits the FPS on your behalf through HMRC-recognised software, or your in-house team files it directly if you run your own UK payroll.
Either way, confirm in writing who presses submit each cycle. The liability for a late or wrong filing stays with you as employer regardless of who does the keying.
What Happens If Payroll Filings Are Wrong
Late Full Payment Submissions draw monthly penalties scaled to headcount: £100 for 1 to 9 employees, £200 for 10 to 49, £300 for 50 to 249, and £400 for 250 or more. Late payment of the tax and National Insurance adds further penalties and interest on top. Beyond the money, a filing that does not reconcile invites scrutiny of the whole payroll, which is why getting the National Insurance and tax right the first time matters more than the headline fine suggests.
What Are the Payroll Deadlines in the United Kingdom?
Most UK payroll obligations land monthly, but the FPS is the exception that catches people: it is tied to payday, not month end. The tax and National Insurance payment then follows on the 22nd of the next month.
| Obligation | Frequency | Deadline | Responsible party |
|---|---|---|---|
| Salary payment | Monthly | Per contract / company policy | Employer |
| Tax & social filing (FPS) | Monthly | On or before the employee’s payday | Employer / payroll provider |
| Tax & contribution payment | Monthly | 22nd of the month | Employer / payroll provider |
| New-hire registration (RTI) | Per hire | On or before the employee’s first payday | Employer / payroll provider |
| Payslip issue | Per pay run | With salary payment | Employer / payroll provider |
Late filing: Monthly penalties are levied for late Full Payment Submissions (FPS). The penalty amount depends on the number of employees: £100 for 1-9 employees, £200 for 10-49, £300 for 50-249, and £400 for 250 or more. Penalties and interest also apply for late payments.
Whichapp tool
Payroll Deadline Tracker
Map your RTI Full Payment Submission and HMRC payment dates across the year before the first run.
Payroll Operations Risk in United Kingdom
Employers in United Kingdom file with 2 separate agencies.
| Payroll operations factor | United Kingdom |
|---|---|
| Agencies to file with | 2 |
| Labour-law changes (last 24 months) | 3 |
| Audit frequency | Medium |
| Penalty severity | Medium |
| Domestic payment rail | Faster Payments |
| Payment settlement | Same day (T+0) |
| Currency stability | Stable |
Sources: gov.uk (compliance), bankofengland.co.uk (payments).
What Payslip and RTI Record Rules Apply in the United Kingdom?
The UK does not run a separate national employee register the way some countries do. Instead, your obligation is met through Real Time Information: by reporting every payroll run to HMRC, you keep the official record of who you employ and what they are paid current as you go.
The payslip rule is the one not to overlook. Every employee must receive an itemised payslip on or before payday, showing gross pay, each deduction and net pay, and it has to be issued for every run.
Because RTI reporting and the payslip are produced from the same calculation, a provider that runs the FPS cleanly usually produces compliant payslips automatically. When you assess a provider, confirm that payslips show National Insurance, income tax and any pension deduction separately, and that the FPS and payslips are always generated from the same figures.
How Much Does Payroll Outsourcing Cost in the United Kingdom?
There are two separate numbers in UK payroll cost, and confusing them is the most common budgeting mistake. The first is your statutory employer cost, which is mainly the 15% employer National Insurance plus any auto-enrolment pension.
11 of the 15 EOR providers we track publish United Kingdom fees; they range from $199 to $599 per employee per month.
| Provider | Monthly EOR fee | Contractor fee | Source |
|---|---|---|---|
| Remofirst | $199 | $25 | Pricing page ↗ |
| Remote People (formerly Horizons) | $199 | — | Pricing page ↗ |
| Playroll | $399 | $35 | Pricing page ↗ |
| Multiplier | $400 | $40 | Pricing page ↗ |
| Plane | $499 | $39 | Pricing page ↗ |
| Lano | $539 | $21 | Pricing page ↗ |
| WorkMotion | $549 | $31 | Pricing page ↗ |
| Atlas | $599 | — | Pricing page ↗ |
| Deel | $599 | $49 | Pricing page ↗ |
| Justworks | $599 | — | Pricing page ↗ |
| Remote | $599 | $29 | Pricing page ↗ |
| Gusto | Custom quote | $6 | Pricing page ↗ |
| Rippling | — | $8 | Pricing page ↗ |
| Safeguard Global | — | $10 | Pricing page ↗ |
Published list prices in USD: EOR fees are per employee per month, contractor fees per contractor per month. Providers that publish neither fee for United Kingdom are not shown.
According to Whichapp’s July 2026 analysis of EOR fees across 40 countries, providers charge $199 to $599 per employee per month in United Kingdom.
11 of the 15 providers we track publish United Kingdom EOR fees. The lowest published rate is $199 per employee per month and the highest is $599.
Contractor management fees in United Kingdom run from $6 to $49 per contractor per month.
The second is the fee you pay a provider to run the payroll for you. They are unrelated, and only the second is negotiable.
Managed Payroll Provider Fees
Managed payroll in the UK is normally priced per employee per month, and most providers quote rather than publish a rate. The price turns on headcount, on whether you also need accounting or HR support, and on complexity such as multiple pay frequencies, pensions across several schemes, or a mix of UK and Scottish tax codes.
The fee buys the calculation, the FPS filing, payslip production and pension submissions. It does not include the tax and National Insurance themselves, which you fund on top, so gather two or three quotes before committing.
What Payroll Provider Fees Usually Include
A standard managed payroll fee in the UK should cover the monthly gross-to-net calculation, deduction of income tax and National Insurance, real-time FPS submission to HMRC, auto-enrolment pension processing, and itemised payslips. Ask for that list in writing. If any of it sits outside the headline fee, you want to know before the first run, not after.
Extra Payroll Costs to Ask About
The gaps tend to appear at the edges of the standard cycle. Ask specifically about year-end reporting and the P60 and P11D forms, statutory sick and parental pay administration, correction filings when something has to be restated, off-cycle or bonus runs, and onboarding setup fees for taking on your payroll. These are the line items that turn a tidy per-head quote into a larger annual number.
When Payroll Outsourcing Becomes Cheaper Than EOR
The choice between running your own payroll and using an EOR is mostly about headcount and how long you plan to stay. An EOR carries a higher monthly fee per person because the provider is the legal employer and absorbs the entity, but it saves you setting one up.
Running your own payroll through a UK limited company is cheaper per head once you are past a handful of employees and committed to staying, because the entity and provider fee spread across more people. In our assessment, the more people you hire and the longer the horizon, the more the economics favour your own entity with outsourced payroll.
Whichapp tool
Employer Cost & Burden Calculator
Model total employer cost on a UK salary, including the 15% employer National Insurance, before you make an offer.
Payroll in the United Kingdom vs EOR in the United Kingdom
The line between the two routes is simple: standard payroll assumes you are the legal employer through a UK entity, while an EOR makes the provider the legal employer so you do not need one.
| Standard payroll | EOR | |
|---|---|---|
| Legal employer | You (your entity) | The provider |
| Entity required | Yes (Ltd) | No |
| Monthly provider fee | Lower | Higher |
| Best for | Longer-term hiring | Fast market entry |
| Control of employment | You | Shared with provider |
| Employer admin burden | Higher | Carried by provider |
Use payroll outsourcing if you already have a local entity (Ltd) or are hiring enough people to justify one. Use an EOR if you need to hire before setting up an entity.
If that second case is you, our guide to EOR in the UK covers the providers, licensing and costs in full. EOR pricing and provider ranking live there, not on this page.
Best Payroll Providers for the United Kingdom
These providers all run payroll in the UK, but they are built for different situations. Below is where each one fits and the local point to check before you sign. We do not list EOR prices here; for unpriced managed payroll, treat the fee as by quote and confirm it during your shortlist calls.
Deel for Payroll in the United Kingdom
Deel is a strong fit if the UK sits alongside other international hires you want on one platform, with a single dashboard and API across markets. UK watch-out: confirm it submits the FPS under RTI directly to HMRC rather than handing it to a partner bureau, and that auto-enrolment pension is set up inside the platform. Read our Deel review.
Remote for Payroll in the United Kingdom
Remote runs much of its payroll through owned entities, which gives a cleaner compliance chain than a partner-network model. That suits employers who want a direct line of accountability for the FPS and HMRC payments.
UK watch-out: confirm UK payroll is on Remote’s own entity rather than a local partner, and that pension auto-enrolment and Scottish tax codes are handled inside the platform. Read our Remote review.
Papaya Global for Payroll in the United Kingdom
Papaya Global is built for consolidating payroll across many countries with finance-grade reporting and audit trails, so it earns its place when the UK is one market in a larger stack. Its weakness is the opposite case: for a single UK entity with no multi-country reporting need, the platform is heavier than the job requires.
UK watch-out: Papaya leans on local partners in some markets, so confirm whether your UK payroll runs on its own engine or a third-party bureau, and how directly it owns the FPS submission. Read our Papaya Global review.
Rippling for Payroll in the United Kingdom
Rippling appeals when you want payroll wired into the same system as HR, IT and device management, with automated journal entries. UK watch-out: it is platform-first, so confirm the depth of its UK statutory handling, specifically PAYE tax codes, National Insurance and FPS filing, against what a UK payroll specialist would offer. Read our Rippling review.
Multiplier for Payroll in the United Kingdom
Multiplier is the value option for multi-country payroll where price predictability matters, which fits smaller UK teams. The trade-off for that price is depth: in tightly regulated areas it tends to carry less local specialist weight than a UK-focused bureau.
UK watch-out: confirm it files the FPS under RTI and handles auto-enrolment pension directly rather than through a reseller, and that its gross-to-net engine models PAYE and the personal allowance accurately before you anchor any salary offers on it. Read our Multiplier review.
Safeguard Global for Payroll in the United Kingdom
Safeguard Global is a payroll-led specialist rather than an HR platform with payroll bolted on, which appeals when running the payroll correctly is the whole point and you do not need a wider people stack. That focus is also its limit: if you want integrated HR, devices and onboarding in one tool, it does less than Rippling or Deel.
UK watch-out: confirm its UK coverage is run in-house rather than subcontracted, and that the service includes auto-enrolment pension and HMRC correspondence, not just the monthly calculation. Read our Safeguard Global review.
How to Choose a Payroll Provider in the United Kingdom
The questions below separate a provider that genuinely runs UK payroll from one that resells a local bureau without owning the detail. Ask them before you sign, not after the first run.
Can They File the FPS Under RTI?
Confirm the provider submits the Full Payment Submission to HMRC on or before payday through recognised software, and that it reconciles the filing against the actual payroll and bank payments each cycle. Ask who presses submit and by when.
Do They Handle Auto-Enrolment Pension?
Check that the provider assesses staff for auto-enrolment, deducts the employee and employer pension contributions, and submits to your pension scheme on time. A provider that treats pensions as a bolt-on leaves you exposed on a separate compliance regime from the tax side.
Can They Model Gross-to-Net Accurately?
A capable provider models gross-to-net both ways, including the personal allowance, the National Insurance bands and Scottish tax codes where they apply, and helps you frame offers rather than just processing whatever number you hand over. Ask to see a sample calculation for a Scottish employee as well as a rest-of-UK one.
How Do They Update for Payroll Law Changes?
UK rates, thresholds and tax codes change at least every tax year, and sometimes mid-year. Ask how the provider tracks HMRC changes and how quickly updates reach your payroll runs.
Who Is Liable for Payroll Errors?
The statutory liability stays with you as employer, but the contract should set out what the provider is accountable for if a miscalculation or late filing is their fault. Get the indemnity and correction process in writing.
Can They Support Multi-Country Reporting?
If the UK is one of several markets, confirm the provider can consolidate reporting across them in a single view, so your finance team is not stitching country files together by hand.
What Support Do They Offer During Terminations or Audits?
Terminations and HMRC queries are where weak providers show their limits. Ask what support you get during a termination calculation or an audit, and whether a named contact handles it or you are routed through a ticket queue.
What Does Terminating an Employee Cost in United Kingdom?
Severance: Statutory redundancy pay calculated as: (years of continuous service) × (age-based multiplier) × (weekly pay capped at statutory maximum). Different multipliers apply to each year based on employee’s age during that service year.
| Length of service | Minimum employer notice |
|---|---|
| Under 2 years | 1 week |
| 2 years to 12 years | 1 week per full year of service |
| 12 years or more | 12 weeks |
Statutory leave: 28 days of paid annual leave plus 8 public holidays a year.
Sources: gov.uk (severance), gov.uk (notice periods), gov.uk (leave).
United Kingdom Payroll Checklist Before Hiring
- Confirm whether you need payroll or an EOR
- Check your local entity status
- Model gross-to-net salary for your offers
- Confirm employer contribution rate (employer NIC)
- Confirm employee deductions (National Insurance)
- Confirm income tax treatment
- Check who files FPS and by when
- Confirm RTI registration is handled
- Confirm the payslip process
- Check leave, sick pay and termination workflows
- Ask who carries liability for calculation errors
- Confirm provider pricing and any extra fees
Work through this before your first hire. The FPS at point seven is the one foreign employers miss most often, because it falls due on or before payday rather than at month end.
FAQs About Payroll in the United Kingdom
What is the employer payroll cost in the UK?
The main mandatory employer contribution is National Insurance at 15% on earnings above the £5,000 secondary threshold. Most employers also pay an auto-enrolment pension contribution of 3% of qualifying earnings, which is a pension payment rather than a tax. On a £40,000 salary, employer National Insurance is £5,250, taking total employer cost to £45,250 before pension.
How do you calculate gross to net salary in the UK?
From gross pay you deduct National Insurance at 8% and income tax through PAYE, after the £12,570 personal allowance is set aside tax-free. On £40,000 gross that is £2,194 National Insurance and £5,486 income tax, leaving a net of £32,320. A Scottish employee’s figure differs because Scotland sets its own income tax bands.
What are PAYE, RTI and the FPS in UK payroll?
PAYE, Pay As You Earn, is how UK employers deduct income tax from each payslip as they go. RTI, Real Time Information, is the rule that you report every payroll run to HMRC at the time you run it. The Full Payment Submission, or FPS, is the filing that carries those figures and is due on or before payday.
What is National Insurance in the UK?
National Insurance is the UK’s main social contribution, funding the state pension and parts of the benefits system. Employees pay 8% on earnings between £12,570 and £50,270, then 2% above that. Employers pay a separate 15% on earnings above the £5,000 secondary threshold, on top of gross salary.
When are payroll filings due in the UK?
The Full Payment Submission must reach HMRC on or before each employee’s payday, with no end-of-month grace period. The income tax and National Insurance are then paid to HMRC by the 22nd of the following month. Late submissions draw monthly penalties scaled to headcount, from £100 to £400.
Do you need a UK entity to run payroll?
Yes for standard payroll: to be the legal employer and file the FPS you need a UK entity, normally a limited company. If you want to hire without setting one up, an EOR becomes the legal employer instead and handles the filings on its own entity. See our guide to EOR in the UK.
Methodology and Disclosure
The National Insurance rates, income tax bands, personal allowance, filing deadlines and penalty figures on this page come from Whichapp’s UK statutory dataset, grounded in HMRC PAYE and Real Time Information rules and the published National Insurance and income tax rates, and refreshed as rates change. The worked example is calculated from those rates and reconciles by construction.
Provider assessments reflect our independent editorial view of payroll fit for the UK; we do not sell payroll, EOR or contractor services. Some provider links may carry affiliate referrals, which never affects our editorial judgement or the figures above.
Already hiring contractors instead of employees? See contractor management in the UK, or start from the UK hiring hub for the full picture.