Payroll compliance is becoming increasingly challenging and with the new year approaching, it is important to review your systems.
Research from Employment Hero found that 84 per cent of the 1,000 UK small business leaders surveyed admitted to payroll errors.
Payroll errors can impact your employee pay and cash flow and even result in penalties.
With rising National Minimum Wage (NMW) and National Living Wage (NLW) and increased National Insurance Contributions (NIC), the risk of non-compliance is high.
As we enter the 2025/2026 tax year, employers must take the right steps to ensure their payroll is accurate.
What are the most common payroll errors?
Several issues continue to catch employees out and these can include:
Payroll issues can potentially damage employee morale and productivity and employers should review their payroll processes regularly to identify any recurring mistakes.
As the requirement to report employee hours through Real Time Information (RTI) has been delayed until April 2026, employers should use this time to assess whether their payroll systems are well-equipped.
Employers may be left feeling overwhelmed by these responsibilities, but with financial and payroll support, you can identify any potential issues and keep your systems accurate.
What are the main payroll compliance risks?
Employers may face several risks when managing payroll, especially with HMRC increasing automated late-payment notices, even for employers who have already paid on time.
These notices often arise from reporting mismatches and can lead to unnecessary payments or avoidable fines.
The Autumn Budget’s higher National Minimum Wage (NMW) and National Living Wage (NLW) rates can mean that even small errors can result in underpayments.
The announced salary sacrifice cap can also further complicate this, as certain deductions may unintentionally push pay below the legal threshold.
Mistakes such as incorrect assessments or missed contributions can create compliance action from The Pensions Regulator.
These errors can often occur during onboarding or when staff roles change and employers must monitor their responsibilities when this occurs.
From 2027, all Benefits in Kind (BIK) will need to be payrolled and employers who delay preparations will risk reporting backlogs and inaccurate tax calculations when the deadlines arrive.
Many businesses that rely on manual systems or spreadsheets may face a higher risk of data errors.
As HMRC moves towards greater digital enforcement, outdated systems make compliance harder to maintain and preparing your payroll ahead of time is essential.
How can employers prepare their payroll systems?
Employers have a responsibility to review their payroll systems and record-keeping to ensure they are accurate and comply with HMRC requirements.
Employers should prepare their payroll systems ahead of any increased digital reporting requirements in 2026 and 2027.
Our payroll specialists can assess your PAYE system and pension support and ensure your payroll is updated with the rising employment costs.
We can help businesses with regular audits, move on from outdated systems, resolve any HMRC discrepancies and prepare for the upcoming changes.
Employers should have confidence that every payslip is correct and we are here to help your business stay compliant throughout the next tax year.
Ensure your payroll is prepared for the upcoming tax year. Contact our team for today for expert support and guidance.
