Payroll Services
in UK
Payroll Services in UK: Complete Employer Guide for 2026-27
For any UK employer, payroll is one of the most time-sensitive and compliance-critical tasks in the business calendar. When payroll is handled correctly, employees are paid accurately, HMRC receives the right PAYE and National Insurance information, and the business avoids avoidable disruption.
This guide explains what payroll services in UK usually include, how PAYE and Real Time Information work, which 2026-27 thresholds employers need to know, and how outsourcing payroll to ENCY&LINE can reduce admin while keeping your business compliant.
What Are Payroll Services in UK?
Payroll processing is the end-to-end task of calculating employee pay, deducting the correct Income Tax and National Insurance Contributions, handling statutory payments, administering pension contributions, producing payslips, and reporting payroll information to HMRC through PAYE.
Each payroll cycle usually includes
- Calculating gross pay from salary, hours, overtime, bonuses, or agreed rates.
- Applying the correct tax code for PAYE Income Tax deductions.
- Calculating employee and employer National Insurance Contributions.
- Processing statutory pay, including SSP, SMP, SPP, ShPP, adoption pay, bereavement pay, and neonatal care pay where relevant.
- Managing workplace pension deductions and employer pension contributions.
- Producing payslips and submitting RTI reports to HMRC on time.
PAYE and RTI: The Employer Framework
PAYE is the system HMRC uses to collect Income Tax and National Insurance from employees through payroll. Employers calculate deductions each pay period, pay employees their net wages, and pass the deductions to HMRC as part of the PAYE bill.
Real Time Information, often called RTI, is the reporting system for payroll. Employers normally send a Full Payment Submission on or before each payday. If no employees are paid in a tax month, or if the employer needs to claim reductions such as statutory payment recovery or Employment Allowance, an Employer Payment Summary may also be required.
| RTI report | When it is used |
|---|---|
| Full Payment Submission (FPS) | Sent on or before payday to report employee pay, tax, National Insurance, statutory payments, student loans, and payroll changes. |
| Employer Payment Summary (EPS) | Used where no employees were paid, or to claim reductions such as statutory pay recovery or Employment Allowance. It is usually due by the 19th of the following tax month. |
| PAYE payment | Employers normally pay HMRC by the 22nd after the tax month when paying electronically, or by the 19th if paying by post. |
Key 2026-27 Payroll Thresholds
Payroll calculations depend on the rates and thresholds in force for the tax year. From 6 April 2026 to 5 April 2027, employers need to apply the correct PAYE, National Insurance, statutory pay, student loan, and pension rules for each employee.
| Area | 2026-27 figure |
|---|---|
| Standard personal allowance | £12,570 per year, or £1,048 per month. |
| Employee primary National Insurance threshold | £12,570 per year, or £1,048 per month. |
| Employer secondary National Insurance threshold | £5,000 per year, or £417 per month. |
| Employer National Insurance rate | 15% for standard category A employees above the relevant threshold. |
| Employment Allowance | Up to £10,500 for eligible employers. |
National Living Wage and National Minimum Wage from April 2026
Employers must pay at least the statutory minimum wage rate for the worker's age and status. Payroll records should support hourly pay, deductions, working time, and any salary sacrifice arrangements so the business can evidence compliance if HMRC checks the position.
| Worker category | Hourly rate from 1 April 2026 |
|---|---|
| Aged 21 and over | £12.71 |
| Aged 18 to 20 | £10.85 |
| Aged under 18, above compulsory school leaving age | £8.00 |
| Apprentices aged under 19, or aged 19+ in the first year | £8.00 |
Income Tax Bands for England, Wales and Northern Ireland
Most payroll software applies tax codes and rates automatically, but employers still need to check starter information, P45s, emergency codes, Scottish tax codes, Welsh tax codes, and tax-code notices from HMRC.
| Band | Annual earnings above the PAYE threshold | Rate |
|---|---|---|
| Basic rate | Up to £37,700 | 20% |
| Higher rate | From £37,701 to £125,140 | 40% |
| Additional rate | Above £125,140 | 45% |
Statutory Payments Every Employer Must Handle
Payroll services in UK must also cover statutory entitlements. These are minimum payments required by law when employees qualify, and they need to be calculated, recorded, reclaimed where allowed, and reported correctly through payroll.
| Payment | 2026-27 payroll rule |
|---|---|
| Statutory Sick Pay (SSP) | £123.25 per week, or 80% of average weekly earnings if lower, with daily rates based on qualifying days. |
| Statutory Maternity Pay (SMP) | First 6 weeks at 90% of average weekly earnings; remaining weeks at £194.32 or 90% of earnings if lower. |
| SPP, ShPP, SAP, SPBP and SNCP | Usually £194.32 per week or 90% of average weekly earnings if lower, subject to eligibility rules. |
| Recovery through EPS | Most statutory family payments can be partly recovered from HMRC through payroll reporting. SSP cannot be recovered. |
Auto-Enrolment and Workplace Pensions
Employers must assess worker eligibility each pay period and enrol eligible workers into a qualifying workplace pension scheme. Payroll needs to deduct employee contributions, calculate employer contributions, send pension data to the provider, and keep records of opt-outs, postponement, and re-enrolment.
Payroll pension duties include
- Assessing employees and workers each pay run.
- Enrolling eligible workers and issuing statutory pension communications.
- Deducting employee pension contributions and adding employer contributions.
- Submitting monthly pension files and reconciling pension payments.
- Managing re-enrolment obligations every three years.
Common Payroll Mistakes UK Employers Make
Even experienced employers can make payroll mistakes when staff join, leave, change hours, receive benefits, take sick leave, go on parental leave, or move between tax codes. The most common issues are often simple, but they can create HMRC corrections, employee disputes, and extra admin.
| Mistake | Why it matters |
|---|---|
| Wrong tax code applied | Can cause employees to overpay or underpay tax and trigger HMRC corrections. |
| Late FPS or missing EPS | HMRC can charge monthly penalties depending on the number of employees in the PAYE scheme. |
| Not updating rates in April | Minimum wage, statutory pay, National Insurance and student loan thresholds can change each tax year. |
| Incomplete starter or leaver processing | Missing P45, starter checklist, leaver date, or final-pay details can create incorrect employee tax records. |
| CIS and payroll mixed together | Construction employers must treat subcontractor CIS deductions separately from employee payroll. |
Why Choose ENCY&LINE for Payroll Services in UK?
Professional payroll support gives employers consistency, accuracy, and deadline control. ENCY&LINE supports UK employers with weekly, fortnightly, four-weekly and monthly payroll runs, RTI submissions, statutory pay, pension administration, starters, leavers, P60s, P11D coordination, CIS support, and PAYE payment guidance.
Whether you are hiring your first employee or managing a growing team, outsourced payroll helps keep the process clear. You know who is being paid, what deductions apply, what must be paid to HMRC, and which payroll records need to be retained.
Payroll services usually include employee pay calculations, PAYE tax, National Insurance, statutory pay, pensions, payslips, RTI submissions, starters, leavers, P60s, and HMRC payment guidance.
An FPS is normally sent on or before the employee payday, even where the employer pays HMRC quarterly rather than monthly.
HMRC can charge penalties for late FPS reports, missing expected FPS reports, or missing an EPS when no employees were paid in a tax month.
Yes. Payroll services can assess employees, calculate pension deductions, prepare pension files, submit data to the provider, and help manage auto-enrolment records.
Outsourcing payroll to ENCY&LINE helps employers reduce admin, avoid common PAYE and RTI errors, stay current with payroll rates, and keep employee payments accurate.
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