Work out your take-home pay
Income tax, National Insurance and net pay for any UK salary, 2026-27.
The employer rate of National Insurance rose to 15% on 6 April 2026, and on the same day Statutory Sick Pay became payable from the first day of absence rather than the fourth. Both changes reached every UK payroll at once, and both carry obligations that extend well beyond a single payslip.
Payroll compliance is the set of duties a UK employer owes to HM Revenue and Customs, to The Pensions Regulator and to each worker. It covers how wages are calculated, what is deducted, when reports are filed, and how long records are kept. For an owner-managed business running payroll in-house, a missed submission or a wrong deduction can trigger penalties, interest and, in the worst case, the closure of a PAYE scheme.
This guide sets out the full compliance picture for the 2026-27 tax year: registering for PAYE, the Real Time Information cycle, the deductions an employer must get right, statutory pay after the recent reforms, the auto-enrolment duty, minimum wage and payslip rules, and the deadlines and penalties that frame the whole system.
Key takeaways
- Any employer who pays a worker at or above the Lower Earnings Limit of £6,708 a year, or who provides benefits, must operate PAYE and report in real time.
- Employer National Insurance is charged at 15% on earnings above a £5,000 Secondary Threshold for the 2026-27 tax year.
- A Full Payment Submission is due on or before every payday; the first late submission in a tax year is not penalised, after which penalties run from £100 to £400 a month by headcount.
- Statutory Sick Pay now starts on day one of absence and has no earnings floor, following the Employment Rights Act 2025.
- Auto-enrolment must be assessed on every payrun, with a £10,000 earnings trigger and a minimum total pension contribution of 8%.
- PAYE records must be kept for at least three years after the end of the tax year they relate to.
What payroll compliance means in the UK
The core obligations
UK payroll compliance rests on three sources of authority. HMRC governs income tax and National Insurance through the Pay As You Earn system [1]. The Pensions Regulator oversees automatic enrolment into a workplace pension [2]. Employment law, enforced through tribunals and advised by bodies such as ACAS, sets the floor for the minimum wage, itemised payslips and statutory leave. An employer meets payroll compliance only when all three are satisfied on every payrun.
The duties are continuous, not annual. Each time a worker is paid, the employer must calculate the correct gross pay, deduct the right tax, National Insurance and any student loan, assess the worker for a pension, and report the whole transaction to HMRC on or before the day payment is made [3]. Record-keeping and year-end documents sit on top of that monthly rhythm.
HMRC recognition and Real Time Information
Real Time Information, known as RTI, has been mandatory for UK employers since 2013. Under RTI, payroll data is sent to HMRC at the point of payment rather than reconciled once a year [4]. Every deduction an employee sees on a payslip is therefore visible to HMRC within days, which removes the end-of-year correction window that existed before RTI.
Because submissions must match HMRC's technical specification exactly, payroll software is tested and granted HMRC-recognised status when it can file Full Payment Submissions and Employer Payment Summaries correctly [3]. HMRC recognition is the entry threshold for serious UK payroll, not an optional extra. Moonworkers, an HMRC-recognised UK payroll platform, submits each RTI message automatically at the end of a payrun, the model most HMRC-recognised payroll software for SMEs now follows.
Registering for PAYE and running the monthly cycle
When an employer must operate PAYE
An employer must register for PAYE before the first payday where at least one employee earns at or above the Lower Earnings Limit, which is £6,708 a year, or £129 a week, for the 2026-27 tax year [5]. Registration is also required where a worker has another job, receives a pension, or gets expenses or benefits [1]. It should be completed before the first payment but cannot be done more than two months in advance.
Even where every worker earns below that floor, the employer must keep payroll records, and registration becomes compulsory the moment any worker crosses it or receives benefits [1]. A business that should have registered but did not faces backdated tax, National Insurance and penalties [5].
The PAYE payment and reporting calendar
The PAYE tax month runs from the 6th of one month to the 5th of the next, and the compliance calendar follows that cycle. The table below sets out the key dates an employer works to each month [3].
| Point in the cycle | What the employer does |
|---|---|
| On or before payday | Send the Full Payment Submission |
| By the 19th of the next month | Send any Employer Payment Summary |
| By the 22nd of the next month | Pay HMRC electronically (19th if by post) |
A Full Payment Submission reports the pay and deductions for the tax month, and the balance owed must reach HMRC by the 22nd of the following month when paid electronically [3]. An employer whose average monthly liability is below £1,500 can arrange to pay quarterly rather than monthly [1].
Real Time Information: the FPS and the EPS
The Full Payment Submission
The Full Payment Submission, or FPS, is the core RTI report. It must be sent on or before each payday and carries every employee's pay, the income tax and National Insurance deducted, any student loan and pension deductions, and the employer's PAYE and Accounts Office references [4]. The pay date entered must be the regular contractual payday even when the actual payment is brought forward for a weekend or bank holiday.
HMRC allows a late FPS in a defined set of circumstances, such as a new starter without a P45 earning below £96 a week, or an ad hoc payment, provided a late-reporting reason code is attached [3]. Where no valid reason is given, the submission counts as late. If a new employer sends no report for 120 days, HMRC can close the PAYE scheme altogether [3].
The Employer Payment Summary
The Employer Payment Summary, or EPS, is sent in addition to, or instead of, the FPS. An employer sends an EPS to reclaim statutory payments, to claim the Employment Allowance, to report Construction Industry Scheme deductions, or to declare the Apprenticeship Levy [3]. It must reach HMRC by the 19th of the month following the tax month for the reduction to apply.
When no employee is paid in a tax month, the employer sends an EPS reporting nil payment rather than an FPS [3]. The Employment Allowance, claimed through the EPS once a tax year, reduces an eligible employer's secondary National Insurance bill by up to £10,500 [6]. Accountants managing RTI across many client schemes typically run this from a single multi-client payroll dashboard rather than scheme by scheme.
Deducting the right amounts: tax, National Insurance and student loans
Income tax and tax codes
Income tax is deducted through PAYE according to each employee's tax code. The standard code for the 2026-27 tax year is 1257L, reflecting a Personal Allowance of £12,570 [7]. The bands for England and Northern Ireland are set out below; Scotland operates its own five-band system and Scottish tax codes are prefixed with the letter S [8].
| Band | Annual income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Above £125,140 | 45% |
A code beginning with K signals that deductions exceed the allowance, for example where an employee owes tax on benefits in kind [8]. HMRC also caps any single PAYE deduction at 50% of gross pay, a safeguard that applies regardless of the tax code or the back-tax owed [7].
National Insurance thresholds and the 15% employer rate
Employer National Insurance rose from 13.8% to 15% on 6 April 2026, and the Secondary Threshold at which it starts is £5,000 a year [9]. Employees pay 8% on earnings between the Primary Threshold and the Upper Earnings Limit, and 2% above that [5].
| Contribution | Annual threshold | Rate |
|---|---|---|
| Employer (secondary) | Above £5,000 | 15% |
| Employee (main band) | £12,570 to £50,270 | 8% |
| Employee (above Upper Earnings Limit) | Above £50,270 | 2% |
Certain employees attract a 0% employer rate up to £50,270, including those under 21, apprentices under 25 and qualifying armed-forces veterans in their first year of civilian employment [5]. Company directors are assessed on an annual, cumulative basis even when paid monthly, which is a frequent source of error in owner-managed businesses [9]. The detail of employer National Insurance matters because it is now the single largest payroll cost for most UK businesses.
Student loan deductions
Student loan repayments are collected through payroll at 9% of earnings above a plan-specific threshold [10]. There are four income-contingent plans plus a separate Postgraduate Loan, and the employer applies whichever plan HMRC notifies through a start notice [10].
| Plan | Annual threshold (2026-27) | Rate |
|---|---|---|
| Plan 1 | £26,900 | 9% |
| Plan 2 | £29,385 | 9% |
| Plan 4 | £33,795 | 9% |
| Postgraduate Loan | Separate threshold | 9% |
Where an employee has both a student loan and a Postgraduate Loan, the Postgraduate Loan is deducted first [10]. Deductions are rounded down to the nearest whole pound, and the correct plan type is critical because the thresholds differ by thousands of pounds [5]. A robust UK payroll engine applies the right plan automatically from the HMRC notice rather than relying on manual selection.
Statutory pay and the 2026 reforms
Family-related statutory pay
Six statutory payments cover family and bereavement leave: maternity, paternity, adoption, shared parental, parental bereavement and the newest addition, neonatal care pay [11]. For the 2026-27 tax year the standard weekly rate for each is £194.32, or 90% of average weekly earnings where that figure is lower [5].
| Payment | Weeks 1 to 6 | From week 7 |
|---|---|---|
| Statutory Maternity Pay | 90% of average weekly earnings | £194.32 (or 90% if lower) |
| Statutory Paternity Pay | n/a | £194.32 |
| Statutory Adoption Pay | 90% of average weekly earnings | £194.32 (or 90% if lower) |
| Shared Parental Pay | n/a | £194.32 |
| Parental Bereavement Pay | n/a | £194.32 |
| Neonatal Care Pay | n/a | £194.32 |
An employer can recover 92% of family-related statutory pay from HMRC, rising to 109% for small employers whose Class 1 National Insurance was £45,000 or less in the previous tax year [12]. This Small Employers' Relief is claimed through the EPS, and many owner-managed businesses leave it unclaimed [12].
Statutory Sick Pay after the day-one reform
Statutory Sick Pay changed structurally on 6 April 2026 under the Employment Rights Act 2025 [13]. Two changes took effect at once: the three waiting days were removed, so SSP is due from the first day of sickness, and the earnings floor was removed, so every employee qualifies regardless of how much they earn [14].
The rate is £123.25 a week, or 80% of average weekly earnings where that is lower, which is the figure that applies to lower-paid workers brought into SSP for the first time [14]. Unlike family-related payments, SSP is not recoverable from HMRC, so the employer absorbs the full cost, and absence-management processes have had to adjust to day-one liability [13]. The full detail of the SSP reform sits alongside the wider statutory-pay changes.
Auto-enrolment: the pension duty on every payrun
Assessing workers and the thresholds
Automatic enrolment requires an employer to put eligible jobholders into a qualifying workplace pension and to assess every worker on every payrun [15]. A worker aged between 22 and State Pension age who earns above the £10,000 earnings trigger must be enrolled; others may be entitled to opt in [2].
| Measure | Annual | Monthly | Weekly |
|---|---|---|---|
| Earnings trigger | £10,000 | £833 | £192 |
| Qualifying earnings, lower limit | £6,240 | £520 | £120 |
| Qualifying earnings, upper limit | £50,270 | £4,189 | £967 |
Contributions are calculated on the band of qualifying earnings between the lower and upper limits [2]. Assessment has to be continuous, because a worker whose pay rises above the trigger in a single period must be enrolled for that period [15].
Contributions, re-enrolment and schemes
The minimum total contribution is 8% of qualifying earnings, of which the employer must pay at least 3% [15]. The employee makes up the balance, usually 5% including tax relief.
Every three years the employer must re-enrol eligible staff who previously opted out and complete a re-declaration of compliance with The Pensions Regulator [16]. Schemes such as NEST, Smart Pension and The People's Pension are widely used, and a payroll platform that assesses auto-enrolment on each payrun and files contributions to the chosen scheme keeps the duty continuous rather than manual [2]. Moonworkers evaluates qualifying earnings on every payrun, with those schemes supported natively.
Minimum wage, payslips and record-keeping
National Minimum Wage and National Living Wage
Paying at least the statutory minimum is a compliance duty enforced by HMRC, with underpayment attracting penalties of up to 200% of the arrears and public naming of the employer [17]. The rates that apply from 1 April 2026 are set out below [17].
| Category | Hourly rate from 1 April 2026 |
|---|---|
| 21 and over (National Living Wage) | £12.71 |
| 18 to 20 | £10.85 |
| Under 18 | £8.00 |
| Apprentice | £8.00 |
The rate depends on age and, for apprentices, on the year of the apprenticeship [17]. Because the minimum is an hourly floor, an employer must track working time accurately, since a fixed salary can fall below the minimum once total hours worked are counted, particularly where unpaid overtime or deductions are involved [18].
Itemised payslips and the records HMRC expects
Every worker is entitled by law to an itemised payslip on or before payday, showing gross pay, the amount and purpose of each deduction, and net pay [19]. Where pay varies by the number of hours worked, the payslip must also show those hours [19].
HMRC requires an employer to keep payroll records for at least three years after the end of the tax year they relate to, covering what was paid, the deductions made, the reports and payments to HMRC, and employee leave and sickness [20]. Failure to keep adequate records can itself attract a penalty of up to £3,000 [20]. Where a business only occasionally pays staff, a single compliant document can be produced through an instant payslip generator without running a full scheme.
Deadlines, penalties and staying compliant
Late filing and late payment penalties
The first late Full Payment Submission in a tax year does not attract a penalty, and HMRC applies a three-day period of grace before treating a submission as late, provided there is no pattern of persistent lateness [21]. After that, monthly late-filing penalties are charged by headcount [21].
| Number of employees | Monthly late-filing penalty |
|---|---|
| 1 to 9 | £100 |
| 10 to 49 | £200 |
| 50 to 249 | £300 |
| 250 or more | £400 |
A return that is more than three months late can attract an additional penalty of 5% of the tax and National Insurance that should have been reported [21]. Late payment of the PAYE bill is charged separately, with penalties that escalate as the number of late payments in the tax year rises [3].
Correcting mistakes and year-end duties
Because RTI is real-time, errors are corrected by submitting an updated or additional FPS rather than waiting for year-end, with the method depending on whether the mistake sits in the current or a previous tax year [22]. Acting quickly limits the knock-on effect on an employee's tax code and benefit entitlements [22].
At year-end the employer sends a final FPS or EPS, provides a P60 to every employee still on payroll on 5 April by 31 May, and reports expenses and benefits on a P11D where relevant [23]. A leaver is given a P45 at the point of leaving [23]. A clear year-end P60 checklist helps an employer close the tax year without gaps.
Working out the true cost of an employee
Before taking on staff or modelling a pay rise, an employer can size the full cost, including employer National Insurance and pension contributions, 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
UK payroll compliance is less a single task than a monthly discipline that links HMRC reporting, pension duties and employment law. The 15% employer National Insurance rate and the day-one Statutory Sick Pay reform have raised both the cost and the complexity of getting each payrun right, and the Real Time Information system means every mistake is visible to HMRC almost immediately.
The direction of travel is towards more automation and tighter real-time checks, with statutory pay and auto-enrolment assessed on every payrun rather than reconciled later. Employers who treat compliance as something the payroll process handles on every run, rather than a year-end scramble, are best placed for whatever the next reform brings.
Frequently asked questions
What are the main payroll compliance requirements for a UK employer?
A UK employer must operate PAYE to deduct income tax and National Insurance, report every payment to HMRC in real time through a Full Payment Submission, assess workers for automatic enrolment into a workplace pension, pay at least the National Minimum Wage, issue itemised payslips, and keep payroll records for at least three years. Statutory pay for sickness and family leave must also be calculated correctly on each payrun. Missing any of these duties can trigger penalties and interest.
When does an employer have to register for PAYE?
Registration is required before the first payday where an employee earns at or above the Lower Earnings Limit of £6,708 a year, has another job, receives a pension, or gets expenses or benefits. It can be completed up to two months before the first payment but not earlier. Even below that earnings floor the employer must keep records, and registration becomes compulsory as soon as a worker crosses the threshold.
What happens if an employer files payroll late?
The first late Full Payment Submission in a tax year is not penalised, and HMRC allows a three-day grace period. After that, monthly penalties range from £100 for up to 9 employees to £400 for 250 or more. A return more than three months late can attract a further penalty of 5% of the tax and National Insurance due, and persistent late payment of the PAYE bill carries separate escalating penalties.
How much is Statutory Sick Pay and when does it start?
Statutory Sick Pay is £123.25 a week, or 80% of average weekly earnings where that is lower, for the 2026-27 tax year. Following the Employment Rights Act 2025, it is payable from the first day of sickness rather than the fourth, and the previous earnings floor has been removed, so every employee qualifies regardless of how much they earn. SSP is not recoverable from HMRC, so the employer bears the full cost.
