We know that payroll might not always get into the spotlight, but it’s one of the most important parts of running a business. Without it, your team doesn’t get paid correctly or on time and that can quickly affect morale and trust. Your go-to guide for managing payroll in the UK starts with understanding what payroll really is: it’s all about keeping track of what each employee earns, including salaries, bonuses, taxes, deductions, and more.
Handling payroll isn’t about sending out paychecks. It’s about staying compliant, calculating everything accurately, and making sure every tax and report is filed correctly. It includes working with the right tax codes, calculating hours and deductions, and using software that simplifies the process.
At SAS KPO Services, we help UK accountants stay on top of payroll from managing payslips to ensuring you meet HMRC requirements smoothly and on time.
Let’s make sure your team is paid right every time because a happy team is a productive team.
Important parts of payroll you should know
Managing payroll is more than just paying employees; it’s about staying accurate, compliant, and keeping things running smoothly for your team. In this guide, we’ll walk you through the key parts of payroll in simple terms, so you know what matters and why. Let’s break it down:
Getting employee info right from day one
Before someone starts their job, the payroll team needs the correct employee details. Simple things like names, bank info, and tax codes must be accurate. Why? Because one small mistake can lead to a missed or wrong payment and that can create stress for employees, especially if they have bills and direct debits scheduled.
Following payroll laws and rules
Payroll must follow several legal rules like minimum wage, overtime laws, GDPR, and more. If a business doesn’t follow these, it could face penalties or legal issues. That’s why compliance is one of the most important parts of payroll management.
Tracking time and attendance
Every business is different. Some have shift workers, others have 9-to-5 office staff, and some have both. That makes tracking hours worked, overtime, holidays, and sick days a bit tricky. But this is a key part of payroll without accurate time tracking, pay can be wrong.
Calculating pay accurately
After hours are tracked, payroll must calculate what each person earns. This covers their commissions, bonuses, and base pay. Each employee may have a different pay structure, so accuracy is key.
Taking out tax and other deductions
Pensions, student loans, income tax, and national insurance must all be subtracted by payroll. These deductions must be done correctly every pay period, or it can create major problems for both the employee and the business.
Reporting to HMRC and pension providers
Payroll teams also handle tax reporting. This includes sending real-time info (like FPS and EPS) to HMRC. They’re also responsible for reporting pension contributions to meet auto-enrolment rules. The company stays current and compliant thanks to these reports.
Using payroll software to make things easier
Luckily, modern payroll software makes everything simpler. It helps automate payments, calculate taxes, and generate reports saving time and reducing errors.
Employees also benefit with easy-to-use apps that store payslips, payment history, and more all securely in one place. Many systems even connect directly with accounting tools like Xero, making life easier for finance teams too.
At SAS, we make payrolls stress-free for UK businesses. Whether you’re just getting started or looking to improve your current setup, your go-to guide for managing payroll in the UK is here to help you stay accurate, compliant, and confident.
How payroll Is calculated in the UK – Explained simply
In the UK, payroll tax is handled through a system called Pay As You Earn (PAYE). It’s your job as an employer to calculate how much tax your employees need to pay, deduct it from their pay, and send it to HMRC (Her Majesty’s Revenue and Customs).
Most companies pay their employees monthly, and payroll has to be calculated each time you make a payment whether your team is salaried or paid hourly.
HMRC must receive your payment by the 19th of every month if you are paying by postal service. If you’re paying online, you have until the 22nd. It is essential to keep to these deadlines in order to prevent fines.
Now, calculating payroll can get tricky. You’ll need to account for income tax, National Insurance, and other deductions like student loans or pensions. HMRC does offer a payroll calculator to help but it’s for checking totals, not doing full calculations.
At the end of each tax year (which ends on 5th April), you must:
- Send HMRC a final payroll report
- Provide each worker with a Form P60 that details their earnings and deductions.
- Report on any expenses or benefits provided to staff
In the UK, payroll is reported using the Real Time Information (RTI) system. This means you must submit payroll data to HMRC every time you pay your staff, not just once a year. You can’t edit or re-submit it after it’s been sent.
Also, whenever you hire a new employee or someone’s job details change, you must inform HMRC as part of your payroll duties.
Managing payroll in the UK takes careful attention but with the right set-up and support, it becomes much easier with this guide. That’s exactly what we help with at SAS.
Why should small businesses consider outsourcing payroll?
Running a small business means wearing many hats and payroll can quickly become one of the most time-consuming and confusing tasks on your list. That’s where outsourcing payroll can make a big difference.
In this guide for managing payroll in the UK, we explain why letting the experts handle it could be the smartest move for your business:
Save time
Instead of spending hours figuring out payslips, deductions, and deadlines, you can focus on growing your business while payroll gets done correctly behind the scenes.
Stay compliant
Payroll providers know the latest UK tax rules and employment laws. They help make sure everything is filed on time and done by the book, so you avoid costly mistakes.
Lower your costs
Hiring someone full-time to manage payroll can be expensive. With outsourcing, you may get professional service without paying for an inside hiring.
Grow with ease
As your team grows, your payroll needs will too. An outsourced provider can scale with you no extra stress, no extra overhead.
Here we support small businesses across the UK with reliable, hassle-free payroll solutions. Let us handle the numbers so you can focus on what you do best.
Understanding payroll tax in the UK
If you run a business in the UK and have employees, it’s important to understand how payroll tax works. Payroll tax includes the income tax and National Insurance that must be deducted from your employees’ wages.
As an employer, it’s your job too:
- Deduct the right amount of tax and National Insurance from each employee’s pay
- Send those amounts to HMRC (Her Majesty’s Revenue and Customs) every month on time
These deductions depend on things like the employee’s tax code, how much they earn, and any allowances they may be entitled to.
The payroll process must be done carefully to make sure everything is correct. Mistakes can lead to penalties or delays in payments.
Luckily, HMRC offers guidance and tools online to help you calculate and understand payroll taxes correctly. By staying on top of these tasks, you’ll keep your business compliant, and your employees paid correctly.
Real time information (RTI) in UK payroll – A simple guide
Real Time Information (RTI) is a modern way for UK employers to report employee pay and tax details to HMRC (Her Majesty’s Revenue and Customs). Instead of sending this information at the end of the year, employers now submit it every time they pay their staff, making payroll more accurate and up to date.
Here are the main types of RTI submissions you should know:
Full payment submission (FPS)
This is the main report sent to HMRC every time you run payroll. It includes:
- Employees pay
- Tax and National Insurance deductions
- Any other amounts taken from wages
Older forms like P35 are replaced by FPS, which needs to be submitted by payday at the latest.
Employer payment summary (EPS)
If you’ve made any adjustments (like reclaiming statutory payments or CIS deductions), this is where you report it.
- You must still submit a Nil EPS even if there is no payment paid to HMRC.
- Deadline: 19th of the following tax month.
- You may use software like Liberty Accounts or your HMRC online account to keep track of your balance and claims.
Earlier year update (EYU) – No longer used
EYU used to be used for correcting past payroll info.
But from 2020–21 onwards, you now just send a corrected FPS with the updated year-to-date figures.
Employee alignment submission (EAS)
Only used by large employers, this helps match employee data with HMRC records before payroll begins.
RTI also replaces some old forms
For example, old starter forms like P45 and P46 are now replaced with a Starter Checklist to determine the correct tax code.
A few important reminders
- You’ll need payroll software that supports RTI
- Always keep employee records updated
- Gather details like passport numbers (for new hires) early
- Submit on time to avoid late filing penalties
RTI is a key part of today’s payroll process, and staying compliant helps avoid fines and keeps your business running smoothly. That’s why, managing payroll for UK, understanding RTI is necessary.
Wrapping it all up: Why smart payroll matters
In the UK, handling payroll doesn’t have to be too much to handle. With the right knowledge, tools, and support, you can run payroll smoothly, stay compliant, and keep your team happy and paid on time.
From understanding tax codes to submitting real-time reports, every step matters and when done right, it builds trust and keeps your business running strong.
Whether you’re a small business owner or an accountant supporting multiple clients, handling payroll the right way saves time, reduces stress, and protects your business from costly mistakes.
At SAS KPO Services, we help businesses across the UK with hassle-free, accurate, and compliant payroll solutions.
Need help managing payroll for your business or clients?
Let our experts take care of it so you can focus on growing your business.
Contact us today, we’re here to make payroll simple for you.
Shivani Soni (Digital Marketing Specialist) writes this blog
