Managing payroll can be tricky, especially as rules change and business scales. Here are the most common mistakes UK businesses make—and how to avoid them.
Using the Wrong Tax Codes
Incorrect tax codes can lead to overpayments or underpayments, frustrating employees and causing HMRC issues. Always check codes using HMRC’s Basic PAYE Tools or speak with your accountant.
Missing Filing Deadlines
Employers must report payroll information to HMRC on or before pay day. Missing these deadlines can result in penalties. Payroll software often includes reminders to help you stay compliant.
Ignoring Auto-Enrolment Duties
All eligible UK employees must be automatically enrolled into a workplace pension. Employers are responsible for:
- Assessing eligibility
- Making contributions
- Re-enrolling employees every 3 years
Failing to meet these duties can result in fines from The Pensions Regulator.
Incorrect Pay slips
Employees must receive accurate pay slips showing gross pay, deductions (e.g., tax, NI), and net pay. Errors can damage trust and result in formal complaints.
Poor Record-Keeping
By law, employers must keep payroll records for at least three years. Use digital systems to safely store payslips, RTI submissions, and pension data.
Not Updating Employee Information
Always update HMRC when employees change addresses, names, or tax status. Neglecting this can cause problems at year-end.
