Payroll Compliance Checklist

Updated April 2026 · UK Payroll

Most UK payroll compliance failures we see are not exotic edge cases.

They come from a monthly rhythm that drifts: an FPS sent the day after payday because Friday payroll ran late, a P11D that sat on a desk until mid-July, a staff member who turned 22 and should have been auto-enrolled three pay cycles ago.

If you run payroll for a UK workforce, the question is not whether HMRC obligations are complicated. It is whether your rhythm catches them before they slip. Our checklist is built around that rhythm.

Which HMRC obligations define UK payroll compliance for employers?

UK payroll compliance sits on four pillars: accurate real-time reporting of pay and deductions to HMRC, timely payment of the tax and NIC you collect, statutory documents issued to employees within legal deadlines, and pension auto-enrolment duties assessed on every payday.

You do not prioritise one over another.

HMRC penalises FPS lateness, P11D omissions, and underpaid NIC simultaneously, and The Pensions Regulator enforces auto-enrolment independently.

The useful frame for People Ops is not “what does HMRC require” but “what does my monthly close look like, and which obligations does it cover automatically versus manually?” If your payroll software handles FPS, EPS, P60, and P11D natively, your manual load shrinks to approvals, exceptions, and once-a-year rituals.

If it does not, you carry more risk than you think.

Section rule: every monthly obligation needs an owner and a calendar date.

What must you do before your first UK payroll run is legally compliant?

Registration is the step most first-time employers underestimate. HMRC has no guaranteed SLA for your PAYE reference letter.

Their guidance states registration can take up to 15 working days, and employers report longer waits during peak periods. Apply two weeks before payday and if the letter is late you cannot submit an FPS; your first payroll is already late.

Register four to six weeks before first payday, confirm tax codes for new starters, collect P45s or Starter Checklists, verify right-to-work documentation, and confirm auto-enrolment duties have started (your duties start date is when your first employee begins, not when you register).

Scenario rule: if your PAYE reference has not arrived by the week before payday, contact HMRC’s Employer Helpline rather than running payroll without it.

Running a first payroll with no FPS submitted creates a compounding compliance problem you will spend months unwinding.

What are the monthly HMRC reporting and payment obligations you cannot miss?

The monthly cycle has two non-negotiable events: FPS every payday, and PAYE/NIC payment to HMRC by the 19th (post) or 22nd (electronic) of the following tax month. An FPS arriving late attracts HMRC penalties from £100 (under 10 employees) to £400 per month (250+ employees).

Three consecutive late FPS submissions can move you out of HMRC’s default late-filing concession.

The FPS rule is precise: file on or before payday, not the day after. The only carve-out is for non-banking days.

If payday falls on a Saturday, Sunday, or bank holiday and you bring the payment forward to the previous banking day, you can file the FPS by the next banking day using late-reporting reason code G. That is not a blanket grace period.

Using code G for a missed Tuesday FPS because Monday was busy is not compliant, and HMRC spots this pattern.

Payoff: your compliance calendar should have the 19th and 22nd of every month circled permanently, and the payroll approval sitting at least two working days before each payday.

How do you handle starters, leavers, and mid-year changes without triggering penalties?

Starter and leaver processing is where smaller UK employers pick up most of their compliance debt. A new employee without a P45 needs a Starter Checklist completed before their first payday so you can apply the right tax code.

Using 0T on a default basis will under or over-tax the employee and usually triggers an HMRC correction letter within two months.

For leavers, issue a P45 on or shortly after the final payday, and report the leave date on the next FPS.

Mid-year changes that affect compliance include changes to working patterns that cross the auto-enrolment earnings trigger (£10,000 annual equivalent for 2025/26), changes to address or NI number, and off-payroll worker determinations within IR35 private sector scope.

Each should trigger a specific action in your payroll software rather than being corrected in the next month’s reconciliation.

What are the annual UK payroll compliance deadlines and what triggers penalties?

Year-end is the most concentrated compliance window. Between 5 April and 22 July, five deadlines stack up with specific, non-discretionary penalties.

• 5 April: Final FPS of the tax year, marked with the “final submission for year” indicator.
• 19 April: Final EPS if claiming recovery of statutory payments made in the final tax month.
• 31 May: P60 issued to every employee on payroll at 5 April. No penalty for late P60, but employees need it for self-assessment, and failure to issue is a compliance failure HMRC can cite.
• 6 July: P11D and P11D(b) submitted for every employee who received non-payrolled benefits in kind. Automatic penalty of £300 per form for late submission, plus £60 per day for continued failure.
• 22 July: Class 1A NIC paid electronically (rate 15% on reported benefits, 19 July if paying by post).

How does the Employment Allowance apply in 2025/26 and who cannot claim it?

Employment Allowance reduces your employer Class 1 NIC liability. From 6 April 2025 it increased to £10,500 per tax year, up from £5,000, and the previous £100,000 secondary Class 1 NIC cap that excluded larger employers was removed.

For most SMEs with under 50 employees this is a meaningful cash-flow change: you can claim up to £10,500 against your employer NIC bill across the year.

Eligibility rules remain restrictive.

You cannot claim as a sole director with no other employees, if more than half your work is public sector (limited charity exceptions), or if you are a deemed employer for off-payroll workers and those fees make up most of your employer NIC.

Claim through your EPS. The allowance is allocated across the tax year, not front-loaded, so unused portions carry forward.

Scenario rule: a sole director taking on a second employee mid-year becomes eligible from the next pay run. Claim on the next EPS rather than backdating.

HMRC will allow forward claims without issue but backdated claims invite scrutiny.

What are your pension auto-enrolment duties every payday and every three years?

Auto-enrolment is a per-payday assessment duty running alongside PAYE, not an annual item.

On every payday you assess every worker against eligibility (age 22 to state pension age, earning above £10,000 annualised, working in the UK) and enrol any eligible jobholder into a qualifying scheme within six weeks, with a minimum 8% total contribution (3% employer, 5% employee including tax relief).

The less visible obligation is re-enrolment, every three years from your original staging or duties start date.

On your re-enrolment date you reassess every worker who previously opted out, automatically re-enrol anyone now eligible, and submit a re-declaration of compliance to The Pensions Regulator within five calendar months.

Missing the re-declaration is a common failure; TPR fines start at £400 and scale to £10,000 per day for larger employers.

Payoff: put the next re-enrolment date in your compliance calendar the day you submit the last declaration. Three years is long enough that institutional memory fails without a forward-dated reminder.

How do you stay compliant with National Minimum Wage and statutory pay rates?

NMW and NLW compliance is a payroll issue even though it usually sits with HR.

From 1 April 2025 the National Living Wage for workers aged 21 and over rose to £12.21 per hour, with 18-20 at £10.00 and 16-17 and apprentices at £7.55.

An underpayment across a pay reference period, even by pence, triggers HMRC naming schemes and penalty calculations at 200% of the underpayment.

Common causes: unpaid time (pre-shift setup, post-shift handover), uniform deductions that push pay below NMW, and salaried-hours workers whose actual hours exceed contracted hours without pay adjustment.

Statutory pay rates also step up every April. Review your payroll software settings every March to confirm new rates apply from 6 April:

• SSP
• SMP
• SPP
• Statutory Parental Bereavement Pay
• and redundancy pay caps

If your policy caps statutory payments, check it still produces a payment at or above the new statutory level.

Scenario rule: if an employee’s working pattern changes mid-year (extra hours, new responsibilities), reassess their effective hourly rate before the next payday.

NMW is not an annual calculation, it is a pay-reference-period calculation.

What record-keeping and HMRC correspondence duties complete the compliance picture?

HMRC requires you to retain PAYE records for at least three years after the end of the tax year they relate to; we recommend six years for commercial and litigation safety.

Records must cover gross pay, tax and NIC deducted, payments to HMRC, employee personal data used in payroll, leave and statutory payment calculations, and benefit-in-kind documentation.

“Retained” in HMRC’s sense means accessible and producible within a reasonable time if requested, not buried in an archive you cannot search.

HMRC compliance checks can be triggered by FPS patterns, P11D discrepancies, NMW complaints, auto-enrolment referrals from TPR, or random selection. Respond promptly.

A missed reply to a PAYE compliance check escalates quickly: from a letter, to a discovery assessment, to a formal determination you then have to appeal.

The cheapest compliance check closes out in three weeks of cooperative correspondence; the most expensive escalates because a letter sat unopened.

Where does this checklist leave Sarah?

We suggest treating this as a spine, not a shopping list. The monthly rhythm (FPS on payday, HMRC paid by the 22nd, auto-enrolment assessed every cycle) is the load-bearing part.

The annual deadlines (5 April, 19 April, 31 May, 6 July, 22 July) are the ritual calendar. Employment Allowance, NMW review, and the re-enrolment cycle are the three items most often missed by teams that pass monthly compliance easily.

Audit against this structure, not a generic HMRC summary, and your compliance posture will improve within a single tax year.

If you are deciding whether to run payroll in-house, engage a bureau, or move to an EOR for UK hires, compliance load is one of the clearest filters.

In-house gives you control and the full weight of every obligation above.

A bureau takes the filing and payment load but leaves you with classification, NMW, and auto-enrolment judgement calls. An hiring in the UK takes all of it but commits you to a per-employee fee model.

Pick the model that matches your team’s capacity to run this rhythm every month, not the one that looks cheapest in year one.