Run payroll and submit RTI

Every time you pay your employees, you must calculate their pay, make the correct deductions, and report this information to HMRC through Real Time Information (RTI). This guide explains the payroll process from calculation to submission.

Full Payment Submission (FPS) requirements

When and how to submit Full Payment Submissions to HMRC under Real Time Information.

A Full Payment Submission (FPS) is the main RTI report that employers must submit to HMRC on or before each payday. It reports all payments made to employees and the deductions taken.

When to submit: On or before each payday (every time you pay employees)
Late submission easement: Within 3 days of payday accepted without penalty (but regular late filing may be challenged)
Year-end deadline: Final FPS must be submitted by 19 April following tax year end
Early submission window: Can submit FPS for next tax year from 6 March
Correction window: 14 days after end of tax month to correct errors within same month

Information included in FPS

Employer details: HMRC office number, PAYE reference, Accounts Office reference
Employee details: Name, NI number, tax code, date of birth
Payment details: Gross pay, tax deducted, NI contributions (employee and employer)
Year-to-date figures: Taxable pay to date, total tax to date
Student loan deductions: If applicable, plan type and amount
Statutory payments: SSP, SMP, SPP amounts paid
Starter/leaver information: New employee details or leaving date

Final FPS for tax year

When submitting your last FPS for the tax year (on or before 5 April), you must indicate it is your Final Submission. This replaces the old P35 annual return.

Running payroll - reporting to HMRC

Before each pay run

Check for HMRC notices - Tax code changes, student loan starts/stops
Review employee changes - New starters, leavers, pay changes
Gather variable data - Hours worked, overtime, bonuses, deductions
Check statutory payments - Any SSP, SMP, SPP due this period

Calculate pay and deductions

Your payroll software will calculate most of this, but you need to understand what is being calculated:

Gross pay: Basic salary + overtime + bonuses + commission
Tax (PAYE): Based on tax code and cumulative pay this tax year
Employee National Insurance: Based on NI category and earnings thresholds
Student loan: If applicable, based on plan type threshold
Pension contributions: Employee percentage of qualifying earnings
Employer NI: Calculated on earnings above secondary threshold
Employer pension: Minimum 3% of qualifying earnings

Understanding PAYE tax codes

How to read and interpret PAYE tax codes for employees.

A PAYE tax code tells employers how much tax-free income an employee is entitled to before tax is deducted. It consists of numbers and letters that indicate the tax calculation method.

Standard code 2025/26: 1257L (£12,570 tax-free allowance)
Numbers meaning: Multiply by 10 to get annual tax-free amount (1257 = £12,570)
L suffix: Standard Personal Allowance applies
M suffix: Marriage Allowance - received 10% of partner's allowance
N suffix: Marriage Allowance - transferred 10% of allowance to partner
T suffix: Other calculations required (review needed)
0T code: No Personal Allowance - all earnings taxed
BR code: All income taxed at basic rate (20%) - no allowance
D0 code: All income taxed at higher rate (40%)
D1 code: All income taxed at additional rate (45%)
NT code: No tax to be deducted

Regional prefixes

S prefix: Scottish taxpayer (e.g., S1257L) - Scottish income tax rates apply
C prefix: Welsh taxpayer (e.g., C1257L) - Welsh income tax rates apply
No prefix: English or Northern Irish taxpayer - UK rates apply

Week 1/Month 1 basis (W1/M1)

If a code shows W1 or M1 (or X), tax is calculated on each pay period separately, not cumulatively. This prevents large refunds or bills when HMRC is still determining the correct code.

K codes

A K code (e.g., K475) means the employee has deductions greater than their allowance (e.g., company car benefit, unpaid tax from previous years). Tax is added to their pay for calculation purposes.

Tax codes explained

Submit your FPS

Submit a Full Payment Submission (FPS) to HMRC on or before each payday:

Run payroll software - Complete all calculations
Generate payslips - Review for accuracy before submission
Submit FPS - Using your payroll software or Basic PAYE Tools
Verify acceptance - Check for any rejection or warning messages
Pay employees - On the scheduled payday

After payroll

Keep records: Retain payroll records for at least 3 years
Track running totals: Year-to-date pay, tax, and NI for each employee
Monitor HMRC account: Check your PAYE liability online
Submit EPS if needed: By 19th of following month for claims/adjustments

Employer Payment Summary (EPS) requirements

When and how to submit Employer Payment Summaries to HMRC.

An Employer Payment Summary (EPS) is submitted in addition to or instead of an FPS to report specific payroll adjustments to HMRC. You submit it monthly or when claiming reductions.

Submission deadline: By 19th of the month following the tax month
When balance updated: If submitted between 20th and 5th, balance updated by 12th of next month
Required for no payments: Submit EPS instead of FPS if no employees paid in a tax month
Period of inactivity: Can notify HMRC of 1-12 months with no expected payments

When to submit an EPS

Claiming statutory payment recovery: SMP, SPP, SAP, ShPP, SSP advances
Claiming Employment Allowance: Annual claim for up to £10,500 NI reduction
CIS deductions suffered: Construction Industry Scheme deductions to offset
No employees paid: Submit EPS instead of FPS for months with no payments
Apprenticeship Levy: Report levy liability for large employers
Scheme ceased: Notify HMRC you are closing your PAYE scheme

Consequences of not submitting EPS

If you do not submit an EPS when no payments are made, HMRC may:

Estimate your PAYE bill based on previous submissions
Send you a payment demand for the estimated amount
Charge late payment penalties on the estimated bill

Running payroll - EPS

Business Context Testing

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Guvnor

Run payroll and submit RTI

Before each pay run

Calculate pay and deductions

Submit your FPS

After payroll

Compliance Assistant

🧪 Business Context Testing

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Before each pay run

Calculate pay and deductions

Submit your FPS

After payroll

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