Running payroll: what do I have to report and pay to HMRC and when?

When you become an employer, your reporting responsibilities multiply - almost overnight! So, what do you need to do to file payroll correctly and stay in HMRC’s good books?   

When must you file payroll?

The rules of HMRC’s Real Time Information (RTI) approach state that employers must notify HMRC “on or before” the date they pay their staff. That means, for example, that if you’re paying your staff on 30th May then your payroll reports will be late if you send them in on 31st May.

What must you report to HMRC?

Here’s a handy checklist of everything your payroll reports have to include.

1. Who’s been paid

Include your employees’ names, addresses and National Insurance (NI) numbers. 

Note: if you work with any “off-payroll workers” - that is, individuals who are giving you invoices for their work but you have to deduct tax and NI before you pay those invoices under the rules of IR35 - then you need to include them on the payroll with an indication that they are an off-payroll worker.

2. Gross pay

Each staff member’s gross pay: their salary before any deductions are taken off. 

3. Other pay

Any pay other than their salary, such as a bonus, holiday pay, overtime pay, or statutory parental or sick pay. 

4. Total deductions

The total for each staff member of anything that will be kept back from their pay before you pay them. These deductions might include:

• Income Tax
• employee’s NI
• pension contributions that the employee is making
• student loan deductions
• deductions made by court order, e.g. council tax payments
• reductions for salary sacrifice schemes, e.g. some pension schemes, cycle-to-work schemes

5. Additional payments

These are payments that you, as an employer, might be making for each employee, such as:

• employer’s NI
• pension contributions you make on your behalf of your employees

6. Subtotal for HMRC

What HMRC can expect to receive from your employee, including:

• Income Tax
• employee’s NI
• student loan repayments

7. Employee subtotal

What each employee will receive - this is called their “net pay”.

Payroll software such as FreeAgent’s Payroll area will take the information you put in for your staff’s wages, tax codes, NI category letters and so forth, and generate reports that you can send directly to HMRC.

What period will each report cover?

Each report covers a “pay period”, which is the period of time for which you’re paying your employees.

Typical pay periods cover either:

• one week
• two weeks
• four weeks
• one month

What format does the report take?

A typical RTI report consists of a Full Payment Submission (FPS) and an Employer Payment Summary (EPS).

Payroll software like FreeAgent will generate the appropriate reports and send them to HMRC as needed. For instance, if you are not paying any staff in a particular pay period, you don’t need to send an FPS, only an EPS - and FreeAgent will do that for you.

When do I have to pay HMRC?

You may pay HMRC either monthly, or (if the amount you pay them in Income Tax, employee’s NI and employer’s NI is usually under £1,500 a month) you may be able to pay quarterly.

If you’re paying monthly then the payment is due by the 22nd of the next tax month after the one you’re paying for. For quarterly payers, your payment will be due by the next 22nd after the quarter ends.

Payment deadline examples

• Paying monthly: for the tax month 6th April - 5th May, you would need to pay by 22nd May.
• Paying quarterly: for the quarter 6th April - 5th July, payment would be due by 22nd July.

The exception: if you pay your HMRC bill by cheque, the cheque must reach HMRC by the 19th of the month in each case.

Payroll, at no extra cost

Payroll doesn’t need to monopolise hours of your business admin - or cost you extra. FreeAgent accounting software comes with payroll baked in, so you can do more admin with less effort and save on costs. Start your 30-day free trial or find out more.