HMRC PAYE duties: 2026/27 thresholds and deadlines

UK small businesses preparing to employ staff must register for PAYE before their first payday, with guidance for 2026/27 identifying a National Insurance lower earnings limit of £129 a week or £559 a month.

The guide, published by SmallBusiness.co.uk on 10 October 2026, covers registration, deductions, payment deadlines and payroll services. Its definition of employees includes limited company directors, bringing owner-directors paying themselves through payroll within its scope.

What happened

PAYE is the mechanism through which HM Revenue & Customs collects income tax and National Insurance contributions from employees’ earnings. Employers calculate deductions for each pay period and account separately for any employer’s Class 1 National Insurance due.

Registration can take place up to two months before the first payment to an employee. Businesses using the online service need a Government Gateway account, directors’ names and National Insurance numbers, their registered office address and a company telephone number.

The registration process also requires time for postal delivery. The guide says HMRC sends an activation code within 10 days, which must be activated within 28 days to avoid having to enrol again.

Once payroll is operating, the employee’s tax code and National Insurance category letter determine the relevant deductions. The employer’s own National Insurance liability depends on earnings exceeding the applicable threshold; the lower earnings limit should not be treated as the rate or amount of that liability.

HMRC must receive electronic payments by the 22nd of the following month for the tax month concerned. The deadline is the 19th for cheque payments, and incorrect or late payments can attract interest.

Businesses expecting their average monthly payments to be below £1,500 may be able to pay quarterly instead. That option changes the frequency of payments to HMRC, rather than removing the need to calculate employees’ deductions each pay period.

The guide lists electronic transfers, direct debit and cheques among payment methods. It also distinguishes the accounts office reference used to identify a payment from the employer’s PAYE reference, an important administrative detail when allocating money to the correct account.

The background

PAYE extends beyond basic salary. Overtime and shift payments fall within its scope, as do tips paid through the employer, although the guide distinguishes tips received directly by employees or distributed through an independent tronc.

Statutory maternity, paternity and adoption payments also need to be considered in payroll. Lump sums and compensation, including redundancy payments, are covered unless a tax exemption applies.

Non-cash remuneration can create a further calculation. For items such as vouchers, shares or premium bonds, PAYE can apply to their cash value rather than simply to money transferred to an employee’s bank account.

Expenses and benefits have separate reporting requirements. Company cars and medical insurance are examples where employers may need to report benefits at the tax year-end and make a separate Class 1A National Insurance payment; some expenses or benefits instead require PAYE treatment.

Payroll deductions can also include amounts unrelated to income tax or National Insurance. The guide identifies attachment of earnings orders and repayments of loans made by an employer to an employee.

Pension auto-enrolment runs alongside PAYE rather than forming part of it. Duties begin when a staff member starts employment, even if the business has not yet entered the PAYE system. For 2026/27, the guide gives minimum contribution rates of 5% for employees and 3% for employers, totalling 8%.

These separate calculations make payroll records a distinct part of financial administration. The wider shift in record-keeping is covered in how HMRC’s digital tax rules affect small business bookkeeping, although payroll has its own submission and payment requirements.

What people are saying

The guide presents in-house software, fully outsourced payroll and part-managed services as different ways to handle the work. With an internal system, a finance team enters employee information and the software performs calculations; starters, leavers and salary changes can be updated without referring each amendment to an external provider.

Sage’s listed packages cover five employees and carry a 90% introductory discount for three months. Payroll Essentials is priced at £1.20 a month during that period and £12 afterwards; Standard rises from £2.30 to £23, while Premium rises from £3.40 to £34.

The Sage service is described as providing payroll reporting and access to HMRC notices through its PAYE Online Service. The difference between introductory and ongoing charges is relevant to businesses reviewing ways to reduce overhead costs, particularly when comparing annual rather than initial expenditure.

Employment Hero’s listed options use a per-employee charging structure. Free payroll costs £0 per employee per month, Core payroll costs £3 and Managed payroll costs £12. The guide describes automated pay runs, payslip generation and support for multiple pay schedules across the packages.

Employment Hero is also described as calculating and synchronising pension payments. Its payroll partner support can address requirements such as complex back-pay calculations, which may influence whether an employer selects software alone or a managed service.

Moorepay’s software is presented as handling statutory and occupational sick pay, holiday accrual and auto-enrolment calculations. Pricing is bespoke, so the guide provides no standard monthly figure for comparison.

HiBob offers workflows for employees joining, leaving or changing roles, alongside a process history for audit purposes. The guide also identifies IR35 support for businesses working with contractors; prices require a direct quotation.

Access offers in-house and part-managed arrangements, allowing employers to retain some administration while outsourcing other tasks. Its prices depend on business size, sector and the chosen package, rather than a single published tariff.

Fully outsourced payroll involves passing employee information to an external company or freelancer to calculate pay, submit files and potentially distribute payslips. The guide identifies overseas employees as one example of workforce complexity that may make external support worth considering.

What happens next

Employers must provide an itemised payslip at or before payment, either electronically or on paper. It needs to show gross pay, deductions and their purposes, and net pay. Failure to provide one can lead to an employment tribunal complaint.

At the tax year-end, employees working for the business on 5 April whose earnings reached the lower earnings limit need a P60 summarising pay and deductions. The guide gives a deadline before 1 June following the end of the tax year.

For eligible employers arranging quarterly electronic payments, the dates listed are 22 July, 22 October, 22 January and 22 April. Those fixed outgoings make cash collection relevant to payroll planning, alongside the issues covered in proposals for a 60-day payment limit for large businesses.

Businesses choosing among the bespoke-priced payroll providers will need quotations before completing a cost comparison. For firms employing their first worker, the immediate administrative sequence is registration, receipt and activation of the HMRC code, and preparation of employee information before the first payroll run.