Work out your take-home pay
Income tax, National Insurance and net pay for any UK salary, 2026-27.
HMRC's own free payroll tool is restricted to businesses with fewer than 10 employees, and it does not generate payslips [1]. Across the wider market, only a small handful of payroll products are both free to use and recognised by HMRC, and each carries the same sub-10 headcount ceiling [2]. Beyond that line sit more than 180 paid providers with no such cap.
For a micro-business running a single director's salary, free payroll software can be entirely adequate. For a growing employer juggling auto-enrolment, payslips and statutory pay, the gaps in a free tool quickly turn into manual work and compliance exposure. The decision is rarely about the licence fee, which is zero, and almost always about what the tool leaves the employer to do by hand.
This article sets out what free UK payroll software actually does, where it stops, what the hidden cost of "free" looks like in practice, and the point at which an employer is better served by software built to scale rather than to cost nothing.
Key takeaways
- The free HMRC tool is limited to employers with fewer than 10 employees and does not produce payslips.
- Only a few free payroll products are HMRC-recognised, and all share the sub-10 employee limit; over 180 paid products carry no such cap.
- Free tools generally handle PAYE, National Insurance and Real Time Information, but not auto-enrolment assessment.
- Every employer still carries full legal duties for payslips, pension auto-enrolment and accurate Real Time Information, whatever software they use.
- The real cost of free payroll software is measured in manual workarounds and compliance risk, not in the licence fee.
What free payroll software means in the UK
Free payroll software in the UK falls into two groups: the tool HMRC publishes itself, and a small set of third-party products that are free at the entry tier and appear on HMRC's recognised list. Both groups are built for the smallest employers, and both are recognised for the specific purpose of reporting PAYE information to HMRC online [3].
Recognition is worth understanding before anything else. HMRC lists software that can report PAYE online, but it is explicit that it cannot recommend one product over another and is not responsible for problems with software an employer chooses [4]. Recognition confirms a tool can file correctly; it says nothing about whether the tool covers the rest of an employer's duties.
The free HMRC tool
The free tool published by HMRC is aimed at businesses with fewer than 10 employees. It calculates PAYE income tax and National Insurance, checks National Insurance numbers for new starters, and submits the required reports to HMRC, including the Employer Payment Summary [5]. For a very small payroll with no extras, those functions cover the core statutory filing obligation.
Its limits are deliberate. The tool is not designed for agents or bookkeepers running payroll for clients, it does not produce payslips, and it offers no auto-enrolment assessment [6]. HMRC's own guidance points employers who need more than basic filing towards other payroll software [7], which is a candid signal that the free tool is a filing utility rather than a complete payroll system.
Other free HMRC-recognised options
Beyond HMRC's own utility, a few commercial products offer a free tier that appears on the recognised list. These free tiers are available only to employers with fewer than 10 employees, the same ceiling that applies to the HMRC tool [8]. Above that headcount, the free option disappears and the employer moves to a paid product.
The feature set at the free tier varies between products, and an employer cannot assume that a free third-party tool covers payslips or pension duties simply because it is recognised. Recognition certifies the PAYE filing capability only [9]. The practical task for a small employer is to read each free tier's feature list against the full duty set, rather than treating "free and recognised" as a complete solution.
What free payroll software does
Within its limits, free payroll software handles the mechanical core of a payrun: it works out what each employee is paid after tax, calculates the deductions, and files the result with HMRC on time. These are the functions that keep a small employer compliant with the basic reporting regime [10].
PAYE and National Insurance calculation
The central job of any payroll tool is to apply the current tax and National Insurance rules to each employee's pay. For the 2026-27 tax year, that means deducting income tax above the £12,570 Personal Allowance at 20%, 40% and 45% for employees in England and Northern Ireland [11], and employee National Insurance at 8% on earnings between £12,570 and £50,270 a year [12].
Free tools also calculate the employer's own National Insurance, charged at 15% on earnings above the £5,000 Secondary Threshold [13]. Where the calculation gets harder, with student loan deductions, directors assessed on an annual basis, or statutory pay, a free tool's coverage becomes patchy, and the employer needs to confirm the specific scenario is supported before relying on it [14].
Real Time Information submission
Every UK employer running PAYE must report payments and deductions to HMRC in real time, sending a Full Payment Submission on or before each payday [15]. Submitting Real Time Information is the function HMRC recognition certifies, so any recognised free tool can file an FPS, and send an Employer Payment Summary where no employees are paid in a tax month or where statutory recoveries are claimed [16].
This matters because late or missing submissions carry penalties, and a new employer that sends no reports for 120 days can have its PAYE scheme closed by HMRC [17]. Reliable Real Time Information filing is therefore the one area where free recognised software genuinely does the job, provided the employer stays within the tool's headcount and feature limits.
What free payroll software does not do
The gaps in free payroll software are more important than its features, because the employer remains legally responsible for everything the tool leaves out. Three gaps recur across free tools: payslips, auto-enrolment, and the headcount ceiling itself.
| Duty | Covered by a typical free tool? | Who remains responsible |
|---|---|---|
| PAYE and NI calculation | Usually | Employer |
| Real Time Information filing | Yes, if HMRC-recognised | Employer |
| Payslips for every worker | Often not | Employer |
| Auto-enrolment assessment | Rarely | Employer |
| Pension contribution handling | Rarely | Employer |
| Support above 9 employees | No | Employer |
Payslips and auto-enrolment gaps
Every UK employer must give each employee and worker an itemised payslip on or before payday, showing gross pay, deductions and net pay, and the hours worked where pay varies by time [18]. HMRC's free tool does not produce payslips at all [19], so an employer relying on it must create compliant payslips by another route, which is a recurring manual task rather than a one-off setup.
Auto-enrolment is the larger gap. Every employer with at least one eligible member of staff must assess their workforce, enrol those who qualify, pay at least the minimum contributions and complete a declaration of compliance with The Pensions Regulator [20]. The minimum total contribution is 8% of qualifying earnings, of which at least 3% must come from the employer [21]. Free tools that offer no auto-enrolment assessment leave the employer to run that assessment and the contribution arithmetic separately [22].
The 10-employee ceiling
The headcount limit is a hard wall rather than a soft guideline. Free HMRC-recognised payroll products, including the HMRC tool itself, are available only to employers with fewer than 10 employees [23]. An employer approaching that threshold has to plan a migration to paid software before the next hire tips them over the line.
A migration mid-year is disruptive, because payroll history, year-to-date figures and employee records all have to move cleanly to keep Real Time Information accurate [24]. Modern UK payroll software that scales from the first employee avoids the forced switch entirely, which is one reason a growing employer often skips the free tier even when the current headcount would technically qualify.
The true cost of "free" payroll software
Free software has no licence fee, but it is not costless. The expense moves from the invoice to the employer's own time and to the risk of getting a statutory duty wrong. For a business owner costing their own hours honestly, that trade is often worse value than a modest paid subscription.
Time and manual workarounds
Each gap in a free tool becomes a manual process the owner performs every payrun: building payslips, running the auto-enrolment assessment, and reconciling pension contributions by hand. These tasks repeat monthly, and they scale with headcount, so the hidden cost grows exactly as the business does [25]. An owner spending an evening a month on payroll workarounds is paying for the software in time rather than money.
The free tool's unsuitability for agents compounds this for anyone running payroll on behalf of others [26]. Accountants managing payroll across several small clients cannot lean on the free tool at all, and typically use a payroll bureau platform that handles multiple employers under one workflow instead of stitching together free single-employer utilities.
Compliance risk
The sharper cost is compliance exposure. The employer, not the software, is liable for a missing payslip, a botched auto-enrolment assessment or a late submission, and the penalties attach regardless of whether a tool was free or paid [27]. A manual workaround is also a manual error waiting to happen, and payroll errors can affect an employee's Universal Credit entitlement as well as the employer's HMRC account [28].
An instant payslip generator can close the payslip gap for an occasional employer, but it does not resolve the auto-enrolment or scaling gaps. The broader point is that "free" shifts risk onto the employer, and that risk is the real line item to weigh against a paid tool's fee [29].
When free payroll software is enough, and when it is not
Free payroll software is a reasonable choice for the narrowest of cases and a false economy for most growing employers. The table below maps common situations to the sensible software tier.
| Situation | Free tool likely enough? | Why |
|---|---|---|
| Single-director company, salary only | Often | Core PAYE and RTI filing is all that is needed |
| Micro-business, under 10 staff, no pension duties yet | Sometimes | Payslips and auto-enrolment still handled separately |
| Employer with auto-enrolment duties | Rarely | Free tools seldom assess or manage pensions |
| Business approaching 10 employees | No | The headcount ceiling forces a migration |
| Accountant or bureau serving clients | No | The free HMRC tool is not for agents |
| Platform embedding payroll for its users | No | Requires an API, not a desktop utility |
The pattern is clear: free works where the payroll is tiny, static and free of pension duties, and stops working the moment any of those three conditions changes [30].
What to look for beyond free
Once an employer outgrows the free tier, the choice is no longer about price but about fit. The criteria that actually separate payroll products are coverage of the full duty set, the ability to scale without a forced migration, and the way the software connects to the rest of the business.
HMRC recognition as the baseline
HMRC recognition is the entry requirement for any serious UK payroll product, not a differentiator. Every product that files Real Time Information at scale carries the recognition, so it is the floor an employer should assume, then look past [31]. The questions that matter next are whether the tool produces compliant payslips, runs the auto-enrolment assessment, and handles statutory pay such as Statutory Sick Pay from day one of absence [32].
For employers in that position, an HMRC-recognised payroll platform that submits Real Time Information automatically and reflects each April's new thresholds without manual reconfiguration removes most of the maintenance burden [33]. That automation is where paid software earns its fee over a free filing utility.
Scalability and integration
The second criterion is how the software grows and connects. A tool that scales from one employee to many without a mid-year migration spares the employer the disruption of moving payroll history between systems [34]. Most UK payroll products are built front-end first, with any integration added later, which suits a business that only ever logs into one screen.
A different model is emerging for businesses that want payroll inside their own systems. A genuine payroll engine, exposed as an HMRC-recognised payroll API, lets an HR platform, an ERP or a bureau tool run UK payroll from within its own product rather than asking users to leave for a separate payroll application, while still meeting the same HMRC recognition every payroll product must hold to file Real Time Information [2]. That is a category apart from a free desktop utility, and it is where the market is heading as more non-payroll platforms embed compliance rather than bolt on a filing tool.
Work out the real cost of a hire before choosing software
Before settling on free or paid payroll, an employer can size the full cost of a role, including employer National Insurance, with the Moonworkers UK salary calculator, which applies the 2026-27 PAYE and National Insurance rules to any gross salary.
£ per month
e.g. 1257L, S1257L, BR, D0
S = Scotland · C = Wales · W1/M1 = non-cumulative
Enter a salary or hourly rate above
About this calculator
This calculator gives you a close estimate of your UK payroll deductions for 2026-27, using HMRC's exact percentage method with periodised thresholds. It handles the three tax territories, K codes with the 50% regulatory limit and its carry-forward, weeks 53, 54 and 56, the cumulative and W1/M1/X bases, student and postgraduate loans, and pension contributions on qualifying earnings. It still won't match your payslip to the penny in every case: it does not cover in-year tax code changes, payrolled benefits in kind, NI deferral across more than one employment, directors on the annual earnings period, or employer-level annual adjustments such as the Employment Allowance and the apprenticeship levy. Powered by the same engine as the Moonworkers Payroll API.
Frequently asked questions
Why might the result differ from my payslip?
This calculator uses your current gross pay and tax code to produce an estimate. K-code carry-forwards and weeks 53, 54 and 56 are handled, and the Year-to-date section reproduces a specific period exactly. What your employer may apply that this does not: a mid-year tax code change, benefits in kind processed through payroll, or NI deferral across more than one employment. For most employees on a standard tax code the difference is negligible.
What tax code should I enter?
Use the tax code shown on your most recent payslip or the PAYE Coding Notice (P2) from HMRC. If you're not sure, 1257L is the standard code for most employees resident in England, Wales, or Northern Ireland. Use S1257L for Scotland or C1257L for Wales if you pay Scottish or Welsh income tax.
Which NI category applies to me?
Most employees use Category A. Use M if you are under 21, H if you are an apprentice under 25, or C if you are over State Pension age. Your employer is responsible for assigning the correct category — if in doubt, check your payslip.
Which student loan plan am I on?
Your plan depends on when and where you studied. Plan 1 covers students who started before September 2012. Plan 2 is for English and Welsh students who started from September 2012 to July 2023. Plan 5 applies to English students who started from August 2023. Plan 4 covers Scottish students. You can check your plan at gov.uk or on your payslip.
What is the YTD cumulative PAYE mode?
HMRC's standard method calculates income tax on your total earnings to date each period, then subtracts tax already paid. If you're mid-year and want to see exactly what tax should be deducted in a specific period, expand the Year-to-date section and enter your running totals from previous periods only.
Conclusion
Free payroll software solves exactly one problem well: filing Real Time Information for a very small, very simple payroll. It does not produce payslips, it rarely touches auto-enrolment, and it stops at the tenth employee, which means the employer keeps carrying the duties the tool leaves out. The licence may be free, but the payslips, the pension assessment and the compliance risk are not, and those costs rise as the business grows.
The sensible way to read "free" is as a filing utility for a static micro-payroll, not as a payroll system. An employer with pension duties, growth plans or clients to serve is usually better off with software that covers the full duty set and scales without a forced switch. As payroll legislation keeps moving each April and more platforms look to embed compliance directly, the gap between a free filing tool and a complete, HMRC-recognised payroll engine is only widening.
Frequently asked questions
Is there genuinely free payroll software in the UK?
Yes, but with tight limits. HMRC publishes a free tool for employers with fewer than 10 employees, and a few commercial products offer a free tier on HMRC's recognised list, all capped at the same headcount. Above nine employees, no free recognised option is available, and the employer moves to a paid product.
Does free payroll software produce payslips?
Often not. HMRC's own free tool does not generate payslips at all, even though every employer must give each worker an itemised payslip on or before payday. An employer using a free tool without payslip support has to create compliant payslips separately every pay period.
Can free payroll software handle auto-enrolment pensions?
Rarely. Most free tools, including HMRC's, offer no auto-enrolment assessment, so the employer must assess staff, enrol those who qualify and manage contributions through another route. The duty to complete a declaration of compliance with The Pensions Regulator remains the employer's regardless of the software used.
What happens when a business grows past the free tier?
The free option ends at the tenth employee, so the business must migrate to paid payroll software before crossing that line. Moving year-to-date figures and employee records cleanly is essential to keep Real Time Information accurate, which is why many growing employers choose software that scales from the first employee and avoid the switch altogether.
