In this section:
- Paying your employees
- The national minimum wage
- Payroll calculations and records: an introduction
- Using commercial software or HMRC’s P11 Calculator
- Setting up and using the Employer CD-ROM P11 Calculator
- Completing the paper form P11
- Calculating student loan deductions
- Payroll giving: an introduction for employers and pension providers
- PAYE record keeping
- Correcting payroll errors
PAYE record keeping
As an employer, you'll usually need to deduct Income Tax and National Insurance contributions (NICs) from your employees' pay and send the amounts you deduct to us each month or quarter. This system is called Pay As You Earn (PAYE).
It's essential to keep accurate PAYE records so we can make sure that:
- you and your employees are paying the right amount of tax and NICs
- your employees are getting any statutory pay they're entitled to
- you're complying with legislation like the National Minimum Wage
You'll also need these records so that you can file Employer Annual Returns and provide supporting evidence if we ask for it.
You must keep your PAYE records for the current and previous three tax years. You can keep them in either an electronic or a paper format.
On this page:
- Records relating to pay, tax and NICs
- Records relating to sickness and sick pay
- Records relating to statutory maternity, paternity or adoption pay
- Records if you don't need to complete a form P11
- Other staff records you need to keep
Records relating to pay, tax and NICs
You must keep full and accurate payroll records for each employee for the current and previous three tax years.
These must include:
- a record of their name and address
- payslips or some other record showing their gross earnings, the tax, NICs and any student loan repayments you deduct, and their net pay - you can use a form P11 or an equivalent payroll record (such as an employee’s record in a commercial payroll software package)
- copies of form P60 - you must give one to each employee at the end of each tax year summarising their pay, tax and NICs for the year
- copies of any form P11Ds you've filed for benefits in kind and expenses
You'll also need to keep details of:
- any additional NICs paid for the year, like Class 1A NICs
- pension payments
- statutory payments - these are Statutory Sick Pay, Statutory Maternity Pay, Statutory Adoption Pay and Statutory Paternity Pay
- leave and sickness absences, overtime, commission and bonuses
- the value of benefits and expenses payments
- payments you've made to HMRC - or recoveries you've claimed
We may ask to see evidence of how you made your calculations for any of these. We may also ask to see supporting information like invoices and receipts.
If you still use paper PAYE forms rather than keeping electronic payroll records, we provide standard forms to help you work out and record the figures you need:
- P11 - pay and deductions working sheet for Income Tax and NICs
- P11D - expenses and benefits in kind
- P32 - payments you make to HMRC
You don't have to use these forms - but if you’re still keeping paper records you'll probably find they make life easier. If you use your own paper records rather than our forms you must make sure they include all the information we need.
If you don't keep full records, we may make estimates of what you'll have to pay.
Payroll calculations and records – an introduction
Expenses and benefits record keeping - more detail
Using your records to file your Employer Annual Return (P35 and P14s)
You'll need your records in order to complete:
- a form P14 End of Year Summary for each employee, showing their pay and deductions for the year
- your form P35 Employer Annual Return, summarising the total PAYE deductions for all of your employees for the tax year
Remember that almost all employers are now required to file their Employer Annual Return online. One significant advantage of keeping electronic records is that it makes it much easier to transfer your end-of-year payroll figures across to your P14s and your P35.
Filing your Employer Annual Return online – find out more
An overview of the PAYE Online service
Records relating to sickness and sick pay
You'll need to record:
- how long your employee is off sick - known as 'period of incapacity for work' - or PIW
- how much SSP you paid
- the dates when you didn't pay SSP and why
You should also keep records of supporting medical evidence, which is usually a note from your employee's doctor or hospital.
Read the detail about calculating, recording and recovering SSP
Records relating to statutory maternity, paternity or adoption pay
If your employee takes parental leave or receives statutory pay when they become a parent you'll need to record details of:
- how much time they take off work
- the statutory payments you make
Their entitlements will depend on how long they've worked for you, and how much they earn.
Records if you don't need to complete a form P11
If you don't have to fill in a form P11 or equivalent payroll record for an employee you must still keep a record of:
- their name and address
- how much you pay them
- the pay period - for example every week, every four weeks, every month
If you're not sure whether you need to complete a form P11 read our guide 'Taking on a new employee'.
Other staff records you need to keep
It's not only records about PAYE and statutory payments that you must keep by law. You should, for example, also keep records of:
- hours worked
- pay rates
- holidays
- accidents, injuries and dangerous occurrences
- accounting data
- crime prevention information
- pensions data
- mortgage or insurance administration
For the detail on setting up and keeping staff records, including Data Protection requirements, read the guidance on the Business Link website.
