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Payroll calculations and records: an introduction

As an employer you're required to keep records of pay, tax and National Insurance (NI). For each employee that you make a payment to during the tax year, you have to prepare and maintain a form P11 or equivalent payroll record (either electronic or paper) if their earnings are above a certain level or if you're required to operate a tax code for them.

The easiest and most convenient method for keeping these records and working out pay and deductions is to use commercial payroll software or HMRC’s free P11 Calculator on the Employer CD-ROM. These do most or all of the calculations you need automatically. They will also make it easier and quicker for you to file your Employer Annual Return (form P35 and forms P14) online after the end of the tax year, which is now a requirement for almost all employers.

Alternatively, you can use a paper version of form P11 that you can download from the HMRC website – but this is more time consuming and less convenient when it comes to filing online.

On this page:

When and why you complete a P11 or equivalent

By law you have to keep records of all payments to and deductions from your employees. For each employee you must record:

  • their gross pay (before tax)
  • their National Insurance contributions (NICs)
  • the amount of tax deducted under PAYE (Pay As You Earn)
  • the amount of any student loan deductions
  • Statutory Sick Pay (SSP)
  • Statutory Maternity Pay (SMP)
  • Statutory Paternity Pay (SPP)
  • Statutory Adoption Pay (SAP)

You must record this information on a separate form P11 or equivalent payroll record (either electronic or paper) for each employee if any of the following apply:

  • You pay an employee an amount that's equal to or above the Lower Earnings Limit (LEL). For the tax year 2009-10 the LEL is £95 in any week or at least £412 in any month.
  • HMRC has issued you with a tax code for your employee.
  • You're required to operate a tax code taken from your employee's form P45.
  • You're required to operate tax code BR (Basic Rate tax) for an employee. This may be because the form P46 wasn't completed in time for the employee's first pay day, or because box C on their P46 was ticked.

The details you enter on the P11 or equivalent payroll record are used to work out how much you need to pay to HMRC each month or quarter for PAYE tax, NICs and student loan deductions. (In certain circumstances your P11 calculations may require a tax refund to an employee for a month or quarter. For details of the procedures to follow, use the link below.)

The P11 figures also provide the information that you'll need at the end of the year to complete your Employer Annual Return (P35 and P14s).

If you don't need to fill in form P11 for an employee - for example because they don't earn enough - you'll still need to keep a record of the employee's name and address and the payments you make to them for each pay period.

Taking on a new employee - learn more

Obtain or view example form P11 (PDF 56K)

Dealing with employee tax refunds

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Information you'll need to set up the P11

You'll need the following to set up and maintain an employee’s form P11 or equivalent record.

Employer and employee details

You'll need:

  • the name of your HM Revenue & Customs (HMRC) office
  • your employer PAYE reference
  • employee start date
  • your employee's first two forenames and surname
  • your employee's NI number
  • your employee's date of birth
  • your employee's works or payroll number, if applicable
  • your employee’s gender
  • your employee's tax code (from P45/P46)
  • whether the employee has a student loan

To find out what to do if your employee doesn't have an NI number or tax code read the guide 'Taking on a new employee'.

If you're a new employer and are required to complete a form P11 for an employee for the first time, you'll need to register with HMRC for PAYE. Read the guide 'Register as an employer' to find out more.

Taking on a new employee

Register as an employer

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Electronic options for completing form P11 (recommended)

Using software to maintain your employees’ payroll records saves you time and helps reduce error. It also makes it easier and quicker for you to file your Employer Annual Return (P35 and P14s) online - this is now a requirement for almost all employers.

You can choose between commercial payroll software and HMRC’s CD-ROM P11 Calculator.

Commercial payroll software

There are many software packages available that offer a full payroll service, including the production of payslips and so on. Once you've input an employee's details these packages will automatically work out all your deductions and amounts to pay. They also allow seamless online filing of PAYE forms, including your Employer Annual Return. Find out more by reading our related guidance on choosing a payroll system.

HMRC P11 Calculator

HMRC’s free P11 Calculator is available on the Employer CD-ROM. It isn't a full payroll software system but it's more than a simple calculator. You can use it in conjunction with HMRC’s Statutory Payment Calculators to keep a running total of your employees' pay and deductions. It also comes with updates that adjust your figures to take account of changes to tax codes.

Employers with nine or fewer employees at the end of the tax year (5 April) can file the Employer Annual Return online automatically from the CD-ROM. (If you have more than nine employees you can use figures from the P11 Calculator to file your return online using HMRC’s 'Online Return and Forms - PAYE' service or using paper forms.) Remember that almost all employers must now file their Employer Annual Return online.

To read more detail about the options for keeping electronic payroll records and about online filing, follow the links below.

Using commercial software or HMRC’s P11 Calculator

Employer deadlines for filing PAYE online

PAYE online filing – an overview

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Completing form P11 using paper methods

If using paper methods, you can download the paper form P11 below, print it from the Employer CD-ROM or order it from the Employer Orderline on Tel 08457 646 646.

There are two ways that you can calculate the figures you'll need:

  • use the free PAYE, NICs and Statutory Payment Calculators on HMRC’s website and Employer CD-ROM - and the Collection of Student Loans Calculator on the CD-ROM
  • work out the figures manually using the tables that you can download from the HMRC website

However, bear in mind that if you keep paper P11s you must still file your Employer Annual Return online, unless you are one of the few employers who are exempt from this requirement.

Find out about completing the paper form P11

Go to form P11 (PDF 56K)

Employer deadlines for filing PAYE online

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Record keeping if you're not required to complete a form P11

If you're not required to complete a form P11 (see the earlier guidance for when this applies) bear in mind that you still need to keep a record of your employee's name and address and the amount of wages paid in each pay period.

What about taxable expenses and benefits?

If you provide your employees with taxable benefits and expenses you'll need to complete separate forms and keep separate records of these - most of this paperwork is completed at the end of the tax year, but you need to tell us about company car benefits during the tax year. Read the detail in the ‘Expenses and benefits’ section.

Dealing with expenses and benefits – find out more

More useful links

Finalising form P11 at the end of the tax year

Completing the Employer Annual Return online: P35 and P14s

Read Employer Helpbook E13, ‘Day-to-day payroll’

Additional guidance on when to make PAYE/NICs payments

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