HMRC charges a fixed penalty of between £100 and £400 for every tax month an employer files its payroll late, and around 30.3 million people were on a UK payroll in June 2026, each one attached to a Full Payment Submission that has to reach HMRC on or before payday [1][10]. Under Real Time Information, a missed submission is visible to HMRC the moment it fails to arrive, not months later at year end.
The penalty regime bites hardest on the employers least equipped to absorb it: small businesses running payroll by hand, new companies unfamiliar with the reporting cycle, and bureaux juggling dozens of client schemes. A single late Full Payment Submission can trigger a fixed penalty, and a submission left outstanding for three months can attract a further charge worth 5% of the tax and National Insurance that should have been reported [6].
This article sets out exactly what HMRC charges for late payroll reporting, the difference between a late filing penalty and a late payment penalty, the easements that stop most first mistakes from costing anything, and the practical steps that keep a payroll scheme penalty-free.
Key takeaways
- HMRC late filing penalties for payroll run from £100 to £400 per tax month, scaled by the number of employees in the scheme [1].
- The Full Payment Submission (FPS) must reach HMRC on or before the day employees are paid [3].
- A three-day easement, a 30-day grace period for new employers, and one free late report per tax year mean most isolated slips carry no penalty [1].
- Late filing and late payment are two separate penalty regimes with different rules and different charges [4].
- HMRC issues penalty notices quarterly, and a penalty paid within 30 days of the notice avoids interest [1].
What counts as a late payroll submission
Real Time Information (RTI) requires every employer operating PAYE to tell HMRC about payments to employees at the point those payments are made, not after the fact. The main return is the Full Payment Submission, sent through payroll software each time employees are paid [9]. A submission is late when it arrives after the payment date without a valid reason recorded against it.
The second RTI return is the Employer Payment Summary (EPS). An employer sends an EPS to recover statutory payments, to claim the Employment Allowance, or to tell HMRC that no employees were paid in a given tax month [3]. Failing to send an expected EPS in a month with no payroll is treated as a late submission in its own right, because HMRC is left expecting a return that never comes [1].
The PAYE tax month runs from the 6th of one month to the 5th of the next, and the reporting obligations hang off that calendar. Understanding the cycle is the first defence against a penalty, because most late submissions come from employers who miss a deadline rather than employers who refuse to file.
The on-or-before rule
The core timing rule is simple to state and easy to breach: the FPS must be sent on or before the date the employer pays its staff [3]. An employer that runs payroll on the 25th but only submits the FPS on the 27th has filed late, even though the money left the business on time. The submission date, not the payment date, is what HMRC measures [1].
The FPS should always carry the employer's normal payment date, even when the actual payment moves for a practical reason such as a bank holiday [2]. An employer that pays early because payday falls on a weekend still records the regular contractual payday in the submission, which keeps the return aligned with HMRC's expectations and avoids triggering a false late-filing flag [2].
The reasons HMRC accepts for filing after payday
HMRC publishes a fixed set of late reporting reasons that an employer can record on the FPS to explain a submission made after payday [2]. Each reason carries its own permitted window, and using the correct code stops the late submission from becoming a chargeable failure [1].
| Situation | Permitted window |
|---|---|
| Employee with no P45, paid under £96 a week or employed less than a week | Within 7 days |
| Payday falls on a non-banking day (weekend or bank holiday) | The next banking day, using the normal payment date |
| Ad hoc payment worked out on the day, such as piece-rate harvest pay | Within 7 days |
| Non-cash payment in kind | As soon as possible, within 14 days after the tax month end |
| PAYE reference not yet received from HMRC | As soon as it arrives |
Recording no reason, or a reason HMRC disputes, leaves the submission exposed to a penalty [2]. An employer that regularly relies on a reason code without a genuine qualifying situation can also be challenged, because the codes exist for real operational exceptions, not as a routine extension of the deadline [1].
How much HMRC charges for late filing
The late filing penalty is a fixed monthly amount set by the size of the payroll scheme, not by how late the submission is or how much tax it carried [1]. An employer is liable to only one late filing penalty for each tax month for each PAYE scheme, however many submissions are late within that month [5].
| Number of employees | Monthly penalty |
|---|---|
| 1 to 9 | £100 |
| 10 to 49 | £200 |
| 50 to 249 | £300 |
| 250 or more | £400 |
An employer running more than one PAYE scheme can be charged a separate penalty for each scheme, which matters for groups and for bureaux operating client payrolls under distinct references [1]. Modern HMRC-recognised payroll software for SMEs files the FPS automatically at the point of each payrun, which removes the manual step where most late submissions originate.
The three-month extended failure penalty
A late filing penalty is the first layer. If a submission is still outstanding three months after it was due, HMRC can charge an additional penalty on top of the fixed monthly amount [6]. This extended failure penalty is calculated at 5% of the tax and National Insurance that would have been shown on the missing return [6].
The extended failure penalty changes the character of the charge. A fixed penalty of £100 is a nuisance for a small employer, but 5% of three months of unreported PAYE and National Insurance can run into hundreds or thousands of pounds, particularly once the employer National Insurance sitting inside those returns is taken into account [7]. This is why a persistently missing submission is far more dangerous than a one-off slip, and why leaving a known gap unresolved is the costliest mistake an employer can make [5].
The easements that stop most first mistakes counting
HMRC built several safety valves into the RTI penalty regime, and most isolated errors fall inside one of them. Knowing where the lines sit turns a moment of panic into a non-event.
The first is the three-day easement. HMRC will not charge a late filing penalty where the FPS is late but every reported payment on it is within three days of the employees' payday [1]. This is a concession for practical delays, not a licence to file three days late every month, and employers who consistently file inside the window but after payday can still be contacted or considered for a penalty [1].
The second is the new employer grace period. A business new to PAYE will not be penalised where it sends its first FPS within 30 days of paying an employee [1]. The third, and the one most employers rely on without realising, is that the first failure in a tax year to send a report on time does not attract a penalty at all [1].
| Easement | Effect |
|---|---|
| Three-day easement | No penalty if all payments on a late FPS are within 3 days of payday |
| New employer grace period | No penalty if the first FPS is sent within 30 days of paying staff |
| First failure of the tax year | The first late report in the tax year is not penalised |
The first-failure concession does not apply to employers registered as an annual scheme, where a single yearly payrun leaves no margin for a free slip [14]. For every other employer, it means one honest mistake a year is effectively forgiven, provided the submission is then filed rather than left outstanding [1].
Late filing versus late payment: two different penalties
A frequent and expensive confusion is treating late filing and late payment as one problem. They are governed by separate rules and carry separate penalties, and an employer can be caught by one, the other, or both [4]. Filing is telling HMRC what is due through the FPS. Payment is sending HMRC the money.
The payment deadline sits on the 22nd of the month following the tax month for electronic payments, or the 19th for payments made by post [8]. An employer that files a perfect FPS on time but pays HMRC late is exposed to the late payment regime, which works on a rising percentage scale rather than a fixed amount [4].
How late payment penalties escalate
Late payment penalties are charged as a percentage of the amount paid late, and the percentage climbs with the number of defaults in the tax year [4]. As with late filing, the first failure to pay on time in a tax year does not count as a default, which gives most employers one buffer before the charges begin [4].
| Number of defaults in the tax year | Penalty on the late amount |
|---|---|
| 1 to 3 | 1% |
| 4 to 6 | 2% |
| 7 to 9 | 3% |
| 10 or more | 4% |
Two further charges sit behind these percentages. An amount still unpaid after six months attracts an additional 5% penalty, and a further 5% applies if it remains unpaid after twelve months, and these apply even where only one payment in the year was late [4]. Daily interest also accrues on everything unpaid, from the due date to the date the money reaches HMRC [13].
What happens when an employer files nothing
The penalty regime assumes a return is late. A different set of consequences applies when a return simply never arrives. If an employer does not submit the FPS and does not tell HMRC through an EPS that no one was paid, HMRC can raise a specified charge, an estimate of what it believes is owed based on the employer's previous filing and payment history [1].
A specified charge does not remove the obligation to file. Only submitting the missing FPS or EPS for each month replaces the estimate with the real figure, and only a proper submission supports an appeal against a late filing penalty [1]. Sending updated year-to-date figures in a later FPS does not clear a specified charge, it simply adjusts the running record while the estimated charge stays in place [1].
Late or incorrect submissions also reach beyond the employer. RTI data feeds the Universal Credit calculation, so a late FPS can distort an employee's benefit entitlement for the month, a consequence that falls on the worker rather than the business [11]. Accountants and bureaux managing this across many clients typically rely on a payroll bureau platform that flags a missing submission before the deadline passes rather than after HMRC does.
Correcting a late or wrong submission
Filing late is not the only way to attract a charge. HMRC can also penalise inaccurate returns, and the size of the penalty depends on the behaviour behind the error [1]. An error made despite reasonable care attracts no penalty, while a careless error can be reduced to nothing with full unprompted disclosure to HMRC [1].
The mechanism for fixing a mistake is usually the next FPS, which carries corrected year-to-date figures, or an additional FPS where a payment was missed [12]. The right correction route depends on whether the error was in the amount paid, the tax deducted, or the employee data such as student loan deductions, and acting quickly keeps a small mistake from hardening into a three-month extended failure [12]. For businesses embedding payroll into their own systems, an HMRC-recognised payroll API handles these corrections and resubmissions programmatically, so a fix is one call rather than a manual reprocess.
Appealing a penalty
HMRC issues RTI penalty notices quarterly rather than immediately, so an employer often learns of a penalty weeks after the failure [1]. A penalty paid within 30 days of the notice avoids interest, and an employer that disagrees can appeal online through the PAYE for employers service [15].
HMRC accepts a defined list of grounds for appeal, including that the data on the returns was incorrect, that the filing expectation was wrong, that no payments were made to employees, or that the employer had a reasonable excuse such as ill health, bereavement, a fire or flood, or an IT difficulty [1]. Each penalty on a notice carries a unique identifier, and an appeal has to quote that identifier so HMRC knows which charge is being contested [16].
Conclusion
Late payroll penalties are not the payroll system trying to catch employers out, they are the visible edge of Real Time Information: because HMRC now sees each payrun as it happens, it can price a missed return immediately rather than waiting for a year-end reconciliation that no longer exists. The fixed £100 to £400 monthly charge is the mild version. The real exposure sits in the three-month extended failure, the rising late payment percentages, and the specified charge that lands when nothing is filed at all.
The employers who never see a penalty are rarely the ones with the most staff or the biggest finance teams, they are the ones whose payroll files itself on the day of each run and flags a gap before a deadline passes. As more of UK payroll moves inside accounting suites, HR platforms and bureau tools, the reporting deadline stops being a diary entry a person has to remember and becomes a property of the software, which is where compliance is quietly heading. A business weighing up its options can compare the true cost of getting this wrong against the per-payslip pricing of software that removes the deadline risk entirely, and smaller operations can start with straightforward small business payroll that submits every FPS on time by default.
Frequently asked questions
How much is the penalty for submitting payroll late to HMRC?
The late filing penalty is a fixed monthly amount based on the number of employees in the PAYE scheme: £100 for 1 to 9 employees, £200 for 10 to 49, £300 for 50 to 249, and £400 for 250 or more [1]. Only one late filing penalty applies per tax month per scheme, however many submissions are late in that month. If a return is still outstanding after three months, HMRC can add a further penalty of 5% of the tax and National Insurance the missing return should have carried [6].
Is there a grace period for filing an FPS late?
Yes. HMRC applies a three-day easement, so a late FPS carries no penalty where all the payments on it are within three days of payday, though employers who rely on this every month can still be contacted [1]. New employers are not penalised if their first FPS is sent within 30 days of paying staff, and the first failure to file on time in a tax year does not attract a penalty for most schemes [1].
What is the difference between a late filing penalty and a late payment penalty?
A late filing penalty is charged for sending the FPS or EPS late, and it is a fixed amount set by scheme size [1]. A late payment penalty is charged for paying HMRC late, and it is a percentage of the amount paid late that rises from 1% to 4% with the number of defaults in the tax year, with extra 5% charges after six and twelve months [4]. The PAYE payment deadline is the 22nd of the following month for electronic payments and the 19th for postal payments [8].
Can a late payroll submission affect employees?
Yes. Real Time Information feeds the Universal Credit system, so a late or inaccurate FPS can distort the benefit entitlement of any affected employee for that month [11]. This makes timely filing a matter of employee welfare as much as employer compliance, because the consequence of a late return can land on the worker's income rather than the business's bank balance.
Image prompt for Imagen (also in frontmatter)
Reportage shot, a UK small business owner at a cluttered office desk reviewing a printed HMRC penalty notice, a laptop open beside them showing a blurred payroll screen, soft daylight from a north-facing window, weekday morning, muted palette of warm grey, oak, paper white, a red-brick office building visible through the window, off-centre composition with the subject in the right third, shot on a Leica Q3 at 28mm f/2.8, photojournalism, 35mm film grain, no AI artefacts, no warped hands, no warped text, landscape orientation 16:9.
