As a business owner, ensuring PAYE (Pay As You Earn) is made on time is just one thing on your long list of financial responsibility.
Missing PAYE deadlines can lead to penalties, interest charges, and additional administrative burdens.
In this guide, we’ll be explaining the essential PAYE deadlines and offering guidance to help your business stay compliant with HMRC regulations.
What is PAYE and How Does it Work?
PAYE (Pay As You Earn) is the system used by HMRC for employers to collect income tax and National Insurance contributions from employees’ wages before they’re paid. It’s a method that ensures employees pay the right amount of tax throughout the year.
Employers are responsible for deducting these amounts and sending them to HMRC, making PAYE a vital part of every UK business’s payroll system.
How Employers Submit PAYE Information to HMRC
Employers must report pay details to HMRC every time they pay their employees by submitting a Full Payment Submission (FPS) through their payroll software. The FPS details employees’ pay, tax, National Insurance, and any other deductions. This submission must be made on or before payday to ensure that HMRC is kept up to date with the correct information.
PAYE Payment Deadlines for UK Businesses
Monthly PAYE Deadlines
Employers paying PAYE monthly must ensure payments reach HMRC by the 22nd of the following month if paying electronically.
For cheque or paper submissions, the deadline is earlier—by the 19th of the following month. Meeting these deadlines is essential to avoid penalties and interest charges.
Quarterly PAYE Deadlines
For smaller businesses with PAYE liabilities of less than £1,500 per month, quarterly payments are an option. These are due by the 19th of April, July, October, and January for paper submissions, or by the 22nd if paying electronically.
What Happens if You Miss a PAYE Deadline?
Penalties and Interest for Late PAYE Payments
Missing PAYE deadlines can result in escalating penalties based on how late the payment is, as well as interest charges on overdue amounts.
Your first late payment won’t receive a penalty, however every late payment after this will be known as a ‘default.’ The penalty amount depends on the number of defaults in the tax year, ranging from 1% to 4% of the payment.
You should however do everything you can to pay on time in future, because if you default on two payments in a tax year (in other words, you miss the payment deadline again), you will be fined 1% of the total of those defaults.
If you miss four payments in a tax year, the penalty is 2% of the total of those defaults, 7 is then 3% and so on.
Please see the table below for how the monthly and quarterly penalties are calculated:
| Late Payments | Penalty |
| 1 | No penalty |
| 2-4 | 1% |
| 5-7 | 2% |
| 8-10 | 3% |
| 11+ | 4% |
You should also be aware that if any amount of PAYE is more than six months late, a penalty of 5% of the amount outstanding will be levied. Another 5% will be charged if the PAYE is still outstanding after 12 months.
These penalties apply to the first late payment of tax even though the first late payment does not count for the default penalties explained above.
How to Avoid PAYE Penalties
To avoid penalties, you can set up reminders ahead of payment deadlines or invest in payroll software that automates submissions to HMRC.
Additionally, many businesses benefit from working with professional accountants, who can help ensure all deadlines are met without errors or delays.
PAYE Year-End Deadlines
Submitting Your Final FPS
At the end of the tax year, employers must submit their final Full Payment Submission (FPS) by 19th April.
This informs HMRC of any final payments made to employees, ensuring that all income and deductions for the tax year are correctly reported.
P60 and Employee Statements
Employers are also required to provide employees with P60 forms by 31st May each year.
The P60 outlines the employee’s total earnings and tax deductions for the year, ensuring transparency and accuracy in the year-end tax process.
Benefits of Meeting PAYE Deadlines
Avoiding Penalties and Interest Charges
By meeting PAYE deadlines, businesses can avoid accumulating unnecessary costs such as penalties and interest charges.
This ensures that operational budgets are kept under control, allowing businesses to focus on growth rather than dealing with financial setbacks due to late payments.
Reduced Administrative Burden
Timely PAYE submissions help reduce administrative workload by preventing the hassle of managing late payment notices, appeals, or interventions from HMRC.
Staying compliant simplifies payroll management and allows businesses to operate more efficiently without disruption.
Calculating PAYE Payments
Calculating PAYE payments involves understanding the deductions from an employee’s gross pay, including income tax, employee National Insurance contributions (NICs), and any other applicable deductions, such as student loans. Employers also need to calculate their own NICs and factor in Employment Allowance if eligible.
How to Calculate PAYE Deductions
The total PAYE payment to HMRC includes:
- Employee Tax and NICs: These are deducted from the employee’s gross pay, based on their tax code and NIC category.
- Employer NICs: Your own National Insurance contributions on each employee’s earnings.
- Student Loan and Other Deductions: If applicable, include deductions like student loan repayments or other mandatory deductions.
- Statutory Payments Reductions: Certain statutory payments (e.g., Statutory Maternity Pay) can reduce your PAYE total, depending on your eligibility to reclaim them.
Most payroll software simplifies this by calculating each component automatically. For businesses using HMRC’s Basic PAYE Tools, step-by-step guidance is available to help calculate accurate totals for each submission.
PAYE Payment Example
For example, if you pay an employee weekly at £300 with tax code 1257L and NIC category letter A, deductions might look like this:
- Gross pay: £300
- Employee NIC: £4.64
- Tax: £11.60
- Net pay: £283.76
The PAYE amount due to HMRC will then be the total tax and employee NICs deducted during the month, along with any employer NICs. For a monthly deadline, these payments should reach HMRC by the 22nd if paying electronically, or by the 19th for cheque payments.
How to Pay PAYE to HMRC
Payment Methods Available
Employers can pay their PAYE bill using various methods, including online payments via the HMRC portal, BACS, bank transfers, direct debit, or even by cheque.
Choosing an efficient payment method ensures payments are processed on time, helping businesses stay compliant with PAYE deadlines.
Setting Up Direct Debit Payments
Businesses can set up direct debit payments through their HMRC account. This method automates PAYE payments, reducing the risk of missing deadlines and incurring penalties.
The setup process is straightforward, requiring basic banking details and employer PAYE reference information.
Reference Numbers for PAYE Payments
Accurate reference numbers are crucial when making PAYE payments to HMRC, ensuring that each payment is allocated to the correct period and type.
Understanding Your PAYE Accounts Office Reference
Your PAYE payment reference starts with a unique 13-character Accounts Office reference assigned by HMRC. When making payments, always use this as the base reference to prevent misallocation.
Adding Year and Month Codes for Precise Payment Allocation
When making early or late payments, add a 4-digit suffix to indicate the tax year and month. E.g. add 2501 for month 1 of the 2024/25 tax year. For Class 1A NIC payments, the final digits should always be 13, indicating a year-end adjustment.
You can use HMRC’s online reference checker to confirm the accuracy of your reference.
PAYE for Class 1A and 1B National Insurance Contributions (NICs)
When handling benefits and expenses for employees, employers in the UK must manage Class 1A and Class 1B NICs, which are specific contributions tied to work benefits.
Understanding Class 1A NIC
Class 1A NICs apply to non-cash benefits provided to employees, such as company cars, health insurance, or gym memberships. These contributions are calculated at the end of the tax year and are separate from regular PAYE payments. The total amount for Class 1A NICs is due by 22 July (or by 19 July if paying by post) for the previous tax year.
To ensure accuracy, use the P11D(b) form, which accompanies the P11D forms summarising benefits provided. Timely payment is essential to avoid penalties and interest on late payments.
Class 1B NIC and PAYE Settlement Agreements (PSA)
Class 1B NICs are associated with PAYE Settlement Agreements (PSAs), which allow employers to cover the tax and NICs on specific expenses and benefits on behalf of employees. This arrangement streamlines processes, especially for smaller, infrequent benefits.
Class 1B NIC payments are also due by 22 July (or 19 July for postal payments) following the tax year-end. PSAs require an agreement with HMRC, making them useful for handling certain expenses while simplifying year-end payroll administration.
Timely and accurate payment of Class 1A and Class 1B NICs is crucial to maintain compliance with HMRC and minimise administrative tasks related to late payment corrections.
PAYE and Employment Allowance
What is Employment Allowance?
Employment Allowance allows eligible businesses to reduce their annual PAYE bill by up to £5,000. This relief is available to businesses with a National Insurance liability below £100,000.
It’s designed to support small employers by reducing their employment costs. Businesses can claim Employment Allowance through their payroll software or via HMRC’s online system.
Common PAYE Mistakes to Avoid
Late Submissions
One of the most common mistakes businesses make is submitting PAYE late, often due to administrative delays or a failure to track deadlines.
These missed deadlines can lead to penalties, increased costs, and unnecessary stress. Ensuring your team has the right systems in place to monitor due dates is essential for staying compliant.
Incorrect Payroll Calculations
Accurate payroll processing is crucial to ensure that PAYE submissions are correct. Mistakes in calculating employee wages, tax, and National Insurance contributions can result in under or overpayment to HMRC, leading to costly corrections and potential penalties. Using reliable payroll software and double-checking calculations can help prevent these errors.
PAYE FAQs
When are PAYE payments due?
PAYE payments are due by the 22nd of the following month for electronic payments or by the 19th for postal submissions.
What happens if I miss the PAYE deadline?
Late PAYE payments result in interest charges and potential penalties depending on how late the payment is.
How can I avoid PAYE penalties?
You can stay on top of your PAYE by using payroll software, setting up direct debits, and keeping an organised payroll system can help avoid penalties.
Can I pay PAYE quarterly?
Yes, businesses with small PAYE liabilities can opt to pay quarterly in April, July, October, and January.
What is Employment Allowance?
Employment Allowance allows eligible businesses to reduce their annual National Insurance liability by up to £5,000.