Fix problems with running payroll
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1. Your PAYE bill is not what you expected
Every month you have to pay HM Revenue and Customs (HMRC) what you owe as part of running payroll for your employees.
There are things you should check if your PAYE bill is not what you expected when you view your online account.
This guide is also available in Welsh (Cymraeg).
What to check
Make sure you sent your Full Payment Submission (FPS) or Employer Payment Summary (EPS) in time for the account to update.
You should also check that you:
- used the date you paid your employees on your FPS report, not the date you sent it
- reported other details in your FPS correctly, for example pay and deductions
- reported your EPS correctly, for example to reclaim any statutory pay
- previously paid HMRC the right amount - you may have paid too much or too little if your reports were incorrect
Employees starting and leaving
Check that you correctly reported any employees starting or employees leaving.
You may get an incorrect bill and duplicate payroll records if you made a mistake. Both are usually corrected automatically - contact HMRC if your PAYE bill is still wrong by the 12th of the next tax month.
Correcting errors
If you find a mistake, follow the guidance to:
You can also correct mistakes if you paid your employee the wrong amount or made incorrect deductions.
Get help to correct your PAYE bill
Contact HMRC’s employer helpline if you need help.
2. You made a mistake in your FPS or EPS
Your PAYE bill might be wrong if you made a mistake in your Full Payment Submission (FPS) or Employer Payment Summary (EPS). You might have to correct:
- pay or deductions
- payment dates
- start or leaving dates for your employee
- employee information
- reports sent in advance
- National Insurance category letters
- amounts in your EPS
- the Apprenticeship Levy you owe (starting from April 2017) if you, or employers you’re connected to, have an annual pay bill of more than £3 million
You’ll only be charged a penalty for a mistake if you did not take reasonable care or did it deliberately.
If you’ve reported the wrong pay or deductions
To correct a mistake made in the current tax year, update the year-to-date figures in your next regular FPS.
The rules are different if you find a mistake in your final FPS of the year.
If the mistake was in the tax years between 6 April 2020 and 5 April 2024
Submit another FPS with the correct year to date figures.
If the mistake was in the tax years between 6 April 2018 and 5 April 2020
You can either submit:
- a further FPS with the correct year to date figures
- an Earlier Year Update (EYU) showing the difference between what you originally reported and the correct figure
You can only use an EYU for tax years when you were reporting online in real time.
If your payroll software cannot send an EYU, you can use HMRC’s Basic PAYE Tools.
Correct a pension death benefit or flexibility payment
If you’re a pension administrator who needs to correct a flexibility payment or death benefit payment:
- select the ‘pension flexibility payment’ or ‘pension death benefit payment’ indicator
- update the ‘pensions drawdown taxable payment’ or ’pensions drawdown non-taxable payment’ fields (or both) with the difference between what you originally reported and the correct figures
If your payroll software cannot do this, contact your software provider.
If your employee has stopped working for you
Include them in your next FPS and correct their year-to-date figures. Include their original ‘Date of leaving’ and put the same or a later ‘Payment date’ than the one shown on their final FPS.
Correct the payment date in your FPS
You should use the date you paid your employees in your FPS.
Send an additional FPS with the correct payment date if you’ve sent one with the wrong payment date. Write ‘H - correction to earlier submission’ in the ‘Late reporting reason’ field.
Send your corrected FPS by the 19th of the tax month after you sent your original FPS. HMRC will apply the correction to the right month.
If the wrong date was in different tax month, you must realign your payroll to the correct tax period.
Correct an employee’s start or leaving date
Update your payroll records with the correct date if you put the wrong start or leaving date for an employee in your FPS.
Do not report the amendment in your next FPS as this may create a duplicate record for the employee.
Correct your employee’s personal information
Correct your next FPS if you’ve made a mistake with your employee’s personal details.
Do not report updates to more than one of your employee’s personal details (for example their name, date of birth or gender) in the same FPS. Your payroll records may be duplicated if you do, and your PAYE bill might be wrong.
If your employee’s details (for example their address or surname) change:
- they must tell HMRC straight away
- you need to update your payroll records
Correct FPS reports sent in advance
If you’ve sent FPS reports in advance that need to be corrected (for example because an employee leaves), you should:
-
send another FPS for the tax month the correction relates to, making sure you fill in all relevant fields and revising the year-to-date figures if needed
-
correct any other FPS reports you sent in advance that are affected by the change
Correct an employee’s National Insurance category letter
How you do this depends on why the category letter changed, and in which tax year.
You’ve used the wrong category letter in the current tax year
Report the mistake in your next FPS.
-
Add the category letter you’ve used incorrectly.
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Put ‘0’ in all National Insurance fields for this category letter except ‘Employee’s NICs this payment’, and enter the amount you have repaid or recovered here, for example put -£300 if you’re repaying an employee’s overpayment of £300.
-
Add the correct category letter, and enter the correct year-to-date National Insurance for this category letter.
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Put ‘0’ in all National Insurance fields for the incorrect category letter for the rest of the tax year - you do not need to do this if the category should never have been used.
Some software allows you to correct this by adjusting net pay. You’ll still need to keep a record of the change.
Your employee’s category letter changed during the tax year
In your next FPS:
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Continue to report year-to-date information for the old category.
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Put ‘0’ in all ‘In this pay period’ fields for this category, and use the ‘Employee’s NICs this payment’ field to adjust any underpayment or overpayment of National Insurance.
-
Add the correct category letter, and enter the correct year-to-date National Insurance for this category letter.
You’ve used the wrong category letter in the tax years between 6 April 2021 and 5 April 2024
Send an additional FPS with the correct category letter and correct year-to-date National Insurance for this category letter.
If the mistake was in the 2020 to 2021 tax year or earlier
Send an EYU with:
- negative amounts in all the National Insurance year-to-date fields in the incorrect category letter, to reduce the employee’s National Insurance to zero
- the correct category letter and correct year-to-date National Insurance
If you’re correcting a mistake in the 2019 to 2020 or 2020 to 2021 tax years, you may be able to send an FPS instead - use your payroll software to check. Send it with the correct category letter and correct year-to-date National Insurance.
If the mistake caused an overpayment or underpayment
You must correct your employee’s National Insurance deductions if they paid too little or too much because they were on the wrong category letter.
Correct an EPS
To correct a mistake in the current tax year, send an EPS with the correct year-to-date figures.
For previous tax years, send an EPS with the correct year-to-date figures for the tax year where you made the mistake.
3. You paid HMRC the wrong amount
What you need to do to correct a payment depends on whether you paid too much or too little, and how the error occurred.
If you’ve paid HMRC too little
If you underpaid because of a mistake in your Full Payment Submission (FPS) or Employer Payment Summary (EPS), correct it in your next regular report. HM Revenue and Customs (HMRC) will add the underpayment to your next PAYE bill.
If you underpaid because you entered the wrong amount when paying HMRC, pay the balance as soon as possible or you may have to pay interest or a penalty. Use your Accounts Office reference when paying.
If you’ve paid HMRC too much
If you overpaid because of a mistake in your FPS or EPS, make the correction in your next regular report. HMRC will take the overpayment off your next PAYE bill.
If you overpaid because you entered the wrong amount when paying HMRC, or you made a duplicate payment, you can balance your account by paying less in your next PAYE bill.
You can also claim a refund if you’ve overpaid. You’ll need to contact HMRC’s employer helpline to claim.
HMRC will repay directly into your account if you’ve sent an EPS with your bank details.
Contact HMRC by post with your bank details if you cannot include them with your EPS.
Reclaim an overpayment for a previous tax year
You must work out why you overpaid before you can reclaim an overpayment for a previous tax year.
Work out why you overpaid
Compare what you’ve paid HMRC with what you’ve owed in your tax account. You may have overpaid if your payments did not take into account:
- an overpayment carried over from a previous tax year
- statutory pay for parents that you were entitled to reclaim
- any repayments made to employees, for example because you used the wrong tax code
- any corrections to your reports
- student loan deductions
- employees who left, for example because you did not report them correctly to HMRC
- any incentive payments from HMRC to send reports online
- any Construction Industry Scheme (CIS) deductions, or if you made deductions incorrectly
You also may have overpaid if you paid HMRC:
- for the wrong tax year
- more than once for the same bill
- an estimated amount in advance
For duplicated or estimated payments, tell HMRC what you paid, what you should have paid and why you paid the additional amount.
Making your claim
Once you know why you’ve overpaid, you can claim your repayment from HMRC. You’ll need to tell them:
- your business’s name and address
- your PAYE reference - this is in your employer registration letter from HMRC
- your contact telephone number
- how much you’ve overpaid - for each tax year you’re claiming
- the tax month you overpaid in (if possible)
- why you overpaid - for each tax year you’re claiming
- whether you’ve claimed this overpayment before
HMRC will offset the amount against your PAYE bill in the current tax year. If you do not owe anything, they will offset the amount:
- against a PAYE bill from a previous tax year
- against other taxes you owe, for example Corporation Tax
You’ll only get a refund if you do not owe HMRC any tax.
If your company has been dissolved or struck off
You must apply by letter if your company has been dissolved or struck off. Contact HMRC by post.
Find out when to expect a reply about your refund
If you’ve applied for a refund by post or phone, find out when to expect a reply from HMRC.
4. You paid your employee the wrong amount or made incorrect deductions
You can correct a mistake with an employee’s pay or deductions by updating the year-to-date figures in your next regular Full Payment Submission (FPS).
You can also correct it by sending an additional FPS before your next regular FPS is due. You need to:
- update the ‘this pay period’ figures with the difference between what you originally reported and the correct figures
- correct the year-to-date figures
- put the same payment date as the original FPS
- put the same pay frequency as the original FPS
- put ‘H - Correction to earlier submission’ in the ‘Late reporting reason’ field
Correct a pension death benefit or flexibility payment
If you’re a pension administrator who needs to correct a flexibility payment or death benefit payment, you must:
- select the ‘pension flexibility payment’ or ‘pension death benefit payment’ indicator
- update the ‘pensions drawdown taxable payment’ or ’pensions drawdown non-taxable payment’ fields (or both) with the difference between what you originally reported and the correct figures
If you underpaid your employee
Pay your employee the amount you underpaid them. On or before the day of this payment, send an additional FPS with:
- the difference between what you originally reported and the correct amount in the ‘In this pay period’ field
- updated year-to-date figures
- ‘H - Correction to earlier submission’ in the ‘Late reporting reason’ field
Correct an employee’s National Insurance deductions
What you need to do depends on when you made the mistake.
If the mistake was in this tax year
Repay or deduct the balance from your employee. Update the year-to-date figures to the corrected amount in your next regular FPS or send an additional FPS.
If you deducted too little, you cannot recover more than the employee’s National Insurance contribution due that month.
Example:
You deducted £100 too little in January. In February, your software calculates an £80 National Insurance deduction, which means you can recover up to £80 towards the underpayment that month (a £160 deduction in total).
Recover the remaining £20 in another month.
If the mistake was in the tax years between 6 April 2020 and 5 April 2024
Send an FPS with the amount you should have deducted.
You’ll need to write to HMRC if both the following apply:
- the difference is negative because you deducted or reported too much National Insurance
- you still owe your employee a refund, for example because they’ve left your employment
In the letter you’ll need to include:
- the reference ‘Overpaid NI contributions’
- your employee’s name, date of birth and National Insurance number
- why you overpaid National Insurance contributions
- which tax years you overpaid in
- how much National Insurance you overpaid
- why you are unable to make the payment to the employee
For a claim for one employee, send the letter to:
HM Revenue and Customs
National Insurance Contributions and Employer Office
BX9 1AN
For a claim for more than one employee, send the letter to:
HM Revenue and Customs
National Insurance Contributions and Employer Office
BX9 1BX
If the mistake was in the tax years between 6 April 2018 and 5 April 2020
Send an FPS with the correct year-to-date National Insurance if:
- your payroll software will let you submit an FPS
- you can pay any National Insurance refunds you owe
If you cannot use an FPS, send an Earlier Year Update (EYU) with the difference between:
- the amount of National Insurance you originally deducted
- the correct amount you should have deducted
If the difference is negative (because you deducted or reported too much National Insurance), you also need to set the ‘NIC refund indicator’ to:
- ‘Yes’ if you’ve refunded your employee or no refund was due
- ‘No’ if you still owe your employee a refund (for example because they’ve left your employment)
If there’s an underpayment
If you deducted too little National Insurance, pay HMRC the underpayment straight away. You can then recover the amount from your employee by making deductions from their pay.
You cannot recover more than the amount of National Insurance the employee owes in a month (so the employee pays no more than double their normal contribution). Carry over the difference to later months - you can only make deductions in the tax year when you made the mistake and the year after.
Correct an employee’s student loan repayments
What you need to do depends on when you made the mistake.
If the mistake was in this tax year
Repay or deduct the balance from your employee. Update the year-to-date figures to the corrected amount in your next regular FPS or send an additional FPS.
If you deducted too little, you cannot recover more than the student loan repayment due that month.
Example:
You deducted £50 too little in June. In July, your software calculates a £30 student loan deduction, which means you can recover up to £30 towards the underpayment that month (a £60 deduction in total).
Recover the remaining £20 in another month.
If the mistake was in previous tax years
You do not need to take any action if either of the following apply:
- you’ve deducted too little
- you’ve already submitted your final FPS for that year
Your employee should contact the Student Loans Company to find out how it affects them.
If you have deducted too much, and you have not sent your final FPS for that year, you can repay your employee. Send an FPS with the correct ‘student loan repayment year to date’ figure as of 5 April for the previous tax year.