How UK payroll works

By PaySlipCheck Editorial · Reviewed by PaySlipCheck Editorial Standards Team · 14 June 2026 · 5 min read

UK payroll is the monthly (or weekly) process that turns gross pay into net take-home — through PAYE Income Tax deduction, National Insurance calculation, pension contribution processing, student loan collection, benefits-in-kind reporting + Real-Time Information (RTI) submission to HMRC on or before each pay date. Employers face strict deadlines: RTI on payday, PAYE + NI paid to HMRC by the 22nd of the following month + year-end P60s by 31 May. This guide explains each step of the cycle, the distinct roles of employer + employee + HMRC + how the annual reconciliation works via P60 + P800 statements.

Verified against 3 official sources · Last reviewed 14 June 2026
On this page
  1. The payroll cycle
  2. The employer's monthly responsibilities
  3. The employee's role
  4. Year-end reconciliation
  5. In short

The payroll cycle

  1. Employee earns gross pay (salary + overtime + bonus + BiK cash equivalent)
  2. PAYE Income Tax calculated using tax code + cumulative earnings
  3. National Insurance calculated using NI category letter + earnings threshold
  4. Pension contribution deducted (net-pay or salary sacrifice) or added post-tax (relief at source)
  5. Student loan deducted if applicable (Plan 1/2/4/5/PGL)
  6. Other deductions — union dues, court orders, salary sacrifice items
  7. Net pay paid to employee
  8. RTI submission to HMRC (Full Payment Submission before pay date)
  9. Employer NI + Apprenticeship Levy paid separately

The employer's monthly responsibilities

  • Calculate PAYE + NI accurately using HMRC-approved software
  • Deduct pension contributions correctly + remit to scheme
  • Submit RTI FPS on or before pay date
  • Pay HMRC by 22nd (electronic) or 19th (cheque) of following month
  • Report BiK via payroll (if payrolled) or P11D annually
  • Auto-enrol eligible employees within statutory period

The employee's role

  • Provide P45 from previous employer (avoids emergency tax)
  • Notify HMRC of changes to tax code, allowances, benefits
  • Check payslip monthly for accuracy
  • Complete Self Assessment if income > £150,000 or additional income sources
  • Claim underpaid tax refunds via HMRC personal tax account

Year-end reconciliation

  • P60 issued by 31 May for each employee
  • P11D issued by 6 July for BiK not payrolled
  • P11D(b) filed with total Class 1A NI on BiK by 6 July
  • HMRC reconciles tax paid vs tax owed; issues P800 for over/under-payment

In short

UK payroll = PAYE + NI + pension + student loan + BiK — reported to HMRC monthly via RTI. Errors show on your payslip; check every month.

Frequently asked questions

What is RTI?

Real-Time Information — HMRC's requirement that employers submit payroll data to HMRC on or before each pay date. Replaced end-of-year P35 filing in 2013.

What's the difference between a payslip and a P60?

Payslip = per pay period breakdown. P60 = year-end summary of total pay + tax + NI. Both required by law.

Can I run my own payroll?

Yes if you have HMRC-recognised payroll software. Most small businesses outsource or use platforms like Xero, QuickBooks, BrightPay, or HMRC's Basic PAYE Tools.

How often should payroll run?

Monthly is most common in UK. Weekly common in retail + hospitality. Fortnightly + four-weekly also allowed.

What happens if payroll is late?

HMRC penalties for late RTI (£100+/month per employer). Late pay to employees can breach employment law + statutory pay dates.

Related calculators

Related guides

More on related topics

  • Attachment of earnings — AEO = court order requiring employer to deduct debt from wages. Protected earnings threshold applies.
  • Auto-enrolment duties — Auto-enrolment = employer duty since 2012. 8% total minimum. Re-enrolment every 3 years.
  • Bank holidays — No statutory right to bank holiday off. Contract decides. 2026 UK has 8 bank holidays.

Related salary breakdowns

Glossary terms used on this page

Quick definitions for the key terms above.

  • PAYE — The UK system through which employers deduct Income Tax and National Insurance from employees' pay before paying it to them.
  • National Insurance — A tax on UK earnings paid by employees, employers and the self-employed, used to fund state benefits and the State Pension.

Sources

All figures on this page are sourced from official UK government publications. We don't cite secondary commentary or other calculator sites.

  1. GOV.UK - PAYE: guidance for employers
  2. GOV.UK - National Insurance rates + categories
  3. ACAS - Employment rights + statutory notice

All tax figures on this page use the same configuration that powers our calculators — see our editorial standards for the review process.

Last reviewed: 14 June 2026. Next review due 14 December 2026.

Disclaimer: This page provides general information based on published HMRC and gov.scot figures. It is not personal tax or financial advice. For your specific situation, please consult a qualified accountant or contact HMRC directly.