UK Payroll Software

UK payroll software runs £4 to £15 per employee per month, the cheapest mature market in our coverage. The work it handles is fixed by HMRC: PAYE, National Insurance, Real Time Information filing on or before payday, auto-enrolment pensions, and year-end P60s.

Get any of those wrong and the penalties are automatic: £100/month for late RTI filing, plus interest on underpaid tax, plus The Pensions Regulator enforcing auto-enrolment with fines starting at £400/day.

If you are running a UK business with 5-200 employees, the right payroll software removes the compliance burden entirely.

The wrong choice, or worse, trying to manage payroll manually: it creates the kind of errors that HMRC catches during reconciliation and that your employees notice on their payslips.

This guide covers what UK payroll software must do, what it costs, where the compliance risks sit, and which platforms are strongest for different business sizes.

We verified pricing and compliance scope against public provider documentation in March 2026.

What must UK payroll software do?

UK payroll has six non-negotiable compliance functions. If your software does not handle all six, your exposure is real and uninsurable.

PAYE calculation. Calculate income tax on each employee’s earnings using their tax code. Apply the cumulative or non-cumulative basis correctly.

• Handle student loan deductions (Plan 1, Plan 2, Plan 4, or Postgraduate) based on the HMRC-supplied start notice.

Tax codes change mid-year, and your software must apply the P6 or P9 coding notices that HMRC issues automatically.

National Insurance. Calculate employee and employer NICs based on each employee’s NI category letter and earnings band. From April 2025, employer NICs run at 15% above the £5,000 secondary threshold.

Employee NICs run at 8% between £12,570 and £50,270, then 2% above that.

A wrong NI category letter is one of the most common payroll errors we see in HMRC compliance reviews, and it often goes undetected until a year-end reconciliation.

RTI (Real Time Information) filing. Submit a Full Payment Submission (FPS) to HMRC on or before each payday reporting every employee’s pay, tax, and NIC deductions. Submit an Employer Payment Summary (EPS) by the 19th of the following month to report statutory payments, CIS deductions, and the Employment Allowance claim. RTI is not manual.

Your software should file it automatically the moment you confirm payroll.

If your payroll software requires you to trigger RTI manually, that is a process risk you do not need.

Auto-enrolment pension. Automatically enrol eligible workers into a qualifying pension scheme. Calculate employer (minimum 3%) and employee (minimum 5%) contributions on qualifying earnings between £6,240 and £50,270.

Process opt-outs within the statutory one-month window.

Handle re-enrolment every three years. Report to The Pensions Regulator.

Missing a re-enrolment cycle is the kind of mistake that only surfaces when TPR runs an audit: by which point you are looking at escalating penalties.

Year-end processing. Generate P60s for all employees by 31 May. File P11D for benefits in kind if applicable.

Submit the final EPS confirming the tax year is complete. P11D submission is optional if you use payrolling of benefits, but that requires registering with HMRC before the start of the tax year, not mid-year.

Statutory payments. Calculate and pay Statutory Sick Pay (£116.75/week from April 2025), Statutory Maternity Pay (90% of average earnings for 6 weeks, then £184.03/week for 33 weeks), Statutory Paternity Pay, and Shared Parental Pay.

Recover eligible amounts from HMRC via the EPS. The statutory payment recovery calculations trip up manual systems; software handles them in the background.

Any provider that markets itself as “HMRC-approved” for payroll is using a phrase worth interrogating. HMRC does not award a formal approval kite-mark for payroll software in the way it does for some tax products.

What HMRC maintains is a list of software developers who have tested their products for RTI compatibility. Being on that list means RTI submission works; it does not mean the software has been audited for PAYE calculation accuracy, NIC edge cases, or auto-enrolment rule changes.

If a vendor leads with “HMRC-approved” in their marketing, ask specifically which of their features have been tested and by whom.

What does UK payroll software cost?

UK payroll software pricing falls into three tiers: basic cloud platforms for small businesses, mid-market platforms with HR integration, and enterprise systems.

We assessed pricing pages across seven providers in March 2026.

Source: Provider pricing pages, verified March 2026. UK-specific pricing in GBP where published.

For a 20-employee UK business, the annual cost ranges from £139 (BrightPay) to approximately £3,500 (Deel Global Payroll at $29/month). The gap is significant.

If the UK is your only payroll market, local providers are dramatically cheaper and purpose-built for HMRC compliance.

The pricing conversation does not stop at platform fees. If you are on Xero for accounting and add Xero Payroll, you are paying for a single integrated environment where journal entries post automatically and payroll costs flow into your P&L without manual exports.

That integration has a real value: it removes the monthly reconciliation step that typically costs 2-3 hours of an accountant’s time.

The question for your Finance team is whether that time saving justifies staying on Xero rather than switching to a cheaper standalone payroll tool.

Which UK payroll provider should you choose?

The right answer depends on where your UK payroll sits in a wider operational picture. We have broken this into five decision paths.

If you are a UK business with 1-20 employees: Sage Payroll (from £7/month) or BrightPay (£139/year). Both handle RTI, auto-enrolment, and year-end processing.

BrightPay’s flat annual fee makes it the cheapest option at scale and is particularly strong for accountants managing multiple client payrolls. Sage has broader name recognition and integrates with the Sage accounting ecosystem.

Neither is the wrong choice; the deciding factor is whether you already use Sage for accounting.

If you are already on Xero: Xero Payroll (included in Xero Standard at £33/month). The payroll module integrates with your accounts, journal entries post automatically, and payroll costs flow into your P&L without manual data entry.

If you are already paying for Xero, the payroll add-on is effectively free.

The trade-off is that Xero Payroll is not as deep on edge-case scenarios as Sage or BrightPay.

If you are a UK business with 50+ employees: Rippling (native UK payroll engine) or Sage Business Cloud.

Rippling’s workflow automation and IT device management integration matters at this scale, particularly if your HR and payroll teams want a single system of record.

Before your Finance team approves Rippling, though, expect a pricing discussion: it is quote-based, and the modular structure means your all-in cost depends heavily on which modules you enable.

Get a fully itemised quote before presenting to the budget holder.

If the UK is part of multi-country operations: Deel ($29/employee/month) or Remote ($29/employee/month).

The value is consolidation: running UK payroll on the same platform as your German, French, and Indian payroll removes vendor management overhead and simplifies monthly reporting.

The trade-off is that the UK-specific payroll functionality in both platforms is adequate but not as deep as a purpose-built UK tool like Sage or BrightPay.

If a UK-specific edge case comes up, such as a complex benefits-in-kind scenario, for example, you may find less documentation and less support depth than with a UK-native provider.

If you are a non-UK company hiring in the UK without a UK entity: Deel EOR ($599/month) or Remote ($599/month). You need EOR, not payroll software, because you do not have a UK entity to run payroll from.

See our UK EOR guide for the full picture on UK EOR pricing, legal structure, and provider comparison.

What are the compliance risks of getting UK payroll wrong?

UK payroll compliance has teeth. These are the four areas where we see the most costly errors.

Late RTI filing. £100/month per 50 employees (or part thereof).

For a 20-employee business, a 3-month delay in filing costs £300 in automatic penalties, regardless of whether your employees were actually paid correctly. Your payroll software should file RTI automatically on each payday.

If it does not, that is a process design failure, not a software limitation.

Auto-enrolment non-compliance. The Pensions Regulator issues fixed penalty notices of £400 for initial failures, escalating daily penalties of £50-£10,000/day depending on employer size, and potentially criminal prosecution for persistent non-compliance.

Auto-enrolment is not optional and it does not have a grace period.

If your new software migration delays auto-enrolment processing even by a single pay cycle, you are exposed.

Employment Allowance under-claiming. Eligible employers can claim up to £10,500/year (from April 2025) off their employer NICs bill.

If your payroll software does not apply this correctly via the EPS, you are overpaying HMRC. We reviewed several mid-market platforms where the Employment Allowance setup requires a manual switch that many small businesses miss entirely. Check that your software has the claim active and that the EPS reflects it.

If you have been on payroll software for more than a year and have never reviewed this, it is worth a check with your accountant.

PAYE and NIC calculation errors. If PAYE or NIC calculations are wrong, your employees receive incorrect net pay and potentially incorrect P60s.

HMRC reconciles annually and issues P800 tax calculations to employees who have underpaid or overpaid.

Those P800s create employee queries that land in your HR inbox and reflect on you, not on your software vendor.

The key risk areas: incorrect tax code application when employees change jobs mid-year, wrong NI category letters for directors, and student loan deductions not applying correctly when HMRC sends a start notice.

For Finance and HR teams jointly managing a payroll migration (moving from one platform to another mid-year: the reconciliation risk is highest. You need parallel runs for at least one pay cycle to confirm that PAYE, NIC, and pension deductions match exactly between your old and new system.

Any variance needs explaining to HMRC, not just correcting internally.

How does HMRC PAYE compliance actually work in practice?

For most People Ops teams, payroll compliance is invisible until something breaks. Understanding the underlying mechanics helps you know what to check and when.

PAYE works on a cumulative basis for most employees. That means the software calculates tax for the year to date, subtracts what has already been paid, and deducts the difference in the current period.

If an employee takes unpaid leave in March and returns in April, their year-to-date figures carry over and the system rebalances automatically. Software handles this without intervention. Manual payroll does not.

RTI means HMRC sees your payroll data in real time, not at year end.

The practical consequence is that HMRC can issue coding notices (P6 or P9) mid-year when an employee’s tax situation changes: they pick up a second job, their benefits-in-kind value changes, they start or stop a pension.

Your software must apply those notices to the next pay run.

If you are using a system that requires manual tax code updates rather than receiving them automatically from HMRC’s PAYE Online service, you are adding unnecessary manual risk.

Auto-enrolment re-enrolment catches many UK businesses off guard. Every three years from your staging date, you must re-enrol all eligible workers who have previously opted out.

Miss the re-enrolment window and TPR will issue a compliance notice. Your payroll software should flag re-enrolment dates.

If it does not, you need a calendar reminder, and your People Ops team needs to know what “re-enrolment” means and when your staging date was.

The payroll software you choose shapes how much of this is invisible versus manual. Good software is compliance running in the background. Poor software is compliance as a monthly project.

What are the switching costs if you change payroll software?

Switching payroll software mid-year is possible but disruptive. You need to understand the transition mechanics before starting the evaluation process.

The main challenge is year-to-date figures. Your new software needs the cumulative PAYE and NIC figures for every employee to calculate the correct deductions going forward.

Most providers import year-to-date data from a CSV export of your old system. In practice, that migration takes 2-4 weeks of data preparation and parallel testing, not a weekend.

If you are switching from a manual or semi-manual process (spreadsheets, a bureau, or a defunct cloud platform), the data quality issue is worse. Year-to-date figures may be inconsistent, and you will need your accountant to verify them before the new software can take over.

Budget for that review.

Some platforms, BrightPay in particular, have a specific migration tool for importing HMRC data directly. That reduces the manual data entry burden significantly and gives you a clean audit trail.

The safest time to switch is at the start of a new tax year, 6 April. Everything resets to zero, there are no year-to-date figures to migrate, and you start clean.

If your business needs to switch mid-year, factor in the reconciliation time and the cost of running parallel payrolls for at least one period before committing to the new system.

Frequently asked questions

Methodology and disclosure

We assessed pricing and feature scope across seven UK payroll platforms against publicly available documentation, HMRC guidance on RTI and auto-enrolment, and The Pensions Regulator’s compliance framework. Pricing was verified against provider pricing pages in March 2026.

Whichapp is an independent comparison site.

We do not sell payroll software. We may earn a commission from provider links. This does not constitute financial or tax advice.

Last reviewed: April 2026