UK Payroll
Overview
The UK Payroll module provides full HMRC-compliant payroll processing for employers operating in the United Kingdom. It handles PAYE tax calculation, National Insurance contributions, student loan deductions, statutory payments, pension auto-enrolment, and Real Time Information (RTI) submissions to HMRC.
ABBPay supports all UK regions (England, Wales, Northern Ireland, and Scotland) with region-specific tax bands where applicable.
HMRC Tax Year
The UK tax year runs from 6 April to 5 April the following year. All payroll calculations, reporting, and submissions follow this cycle.
| Element | Detail |
|---|---|
| Tax Year Start | 6 April |
| Tax Year End | 5 April (following year) |
| Current Tax Year | 2025-26 |
| Weekly Periods | 52 (Week 1 to Week 52) |
| Monthly Periods | 12 (Month 1 to Month 12) |
HMRC Integration (RTI)
What is RTI?
Real Time Information (RTI) is HMRC's payroll reporting framework. Employers must report payroll information to HMRC on or before each payday, rather than at year end.
FPS - Full Payment Submission
An FPS must be submitted every time employees are paid. It contains details of each employee's pay, tax, and NI for the period.
| FPS Data | Description |
|---|---|
| Employee Details | Name, NI number, date of birth |
| Pay Period | Tax period number and dates |
| Taxable Pay | Gross taxable pay for the period |
| Tax Deducted | PAYE income tax deducted |
| NI Contributions | Employee and employer NI (all categories) |
| Student Loan | Student loan deductions |
| Pension | Pension contributions under net pay arrangement |
| Starter/Leaver | New starter or leaver information |
| Hours Worked | Banded hours worked |
| Payment After Leaving | Any payments made after employment ended |
FPS Submission Process
- Complete and approve the payrun.
- Navigate to Payroll > Payrun > [Payrun Reference].
- Review the HMRC submission data.
- Click Submit FPS to transmit to HMRC.
- Monitor the submission log for confirmation or errors.
FPS Deadlines
| Pay Frequency | Deadline |
|---|---|
| Weekly | On or before payday |
| Bi-weekly | On or before payday |
| 4-weekly | On or before payday |
| Monthly | On or before payday |
| Final FPS of year | 19 April |
Important: Late FPS submissions may result in HMRC penalties. Submit on or before each payday.
HMRC Submission Log
Each payrun detail page includes a submission log showing:
| Column | Description |
|---|---|
| Submission Type | FPS or EPS |
| Date Submitted | Timestamp of submission |
| Status | Accepted, Rejected, or Pending |
| HMRC Response | Response message from HMRC |
| Correlation ID | HMRC tracking reference |
EPS - Employer Payment Summary
The EPS reports adjustments to HMRC that are not included in the FPS, such as statutory payment recoveries, CIS deductions suffered, and year-end declarations.
Navigate to Payroll > EPS.
EPS Submissions
| Field | Description |
|---|---|
| Tax Period | The tax month (1-12) being reported |
| SMP Recovery | Statutory Maternity Pay recovered |
| SPP Recovery | Statutory Paternity Pay recovered |
| SAP Recovery | Statutory Adoption Pay recovered |
| SHPP Recovery | Statutory Shared Parental Pay recovered |
| SSP Recovery | Statutory Sick Pay (small employers only) |
| NIC Compensation | Additional NIC compensation (small employers) |
| CIS Deductions | Construction Industry Scheme deductions suffered |
| Employment Allowance | Employment Allowance claim indicator |
| Final Submission | Year-end indicator (final EPS for tax year) |
Creating an EPS
- Navigate to Payroll > EPS > Create.
- Select the tax period.
- Enter or verify the recovery amounts.
- Click Submit to transmit to HMRC.
EPS History
View all past EPS submissions with status and details.
Navigate to Payroll > EPS.
| Column | Description |
|---|---|
| Tax Period | Month number |
| EPS Type | Regular or Final |
| Amounts | Recovery and compensation amounts |
| Status | Submitted, Accepted, Rejected |
| Date | Submission date |
EPS Deadlines
| Deadline | Date |
|---|---|
| Monthly EPS | 19th of the following month |
| Final EPS | 19 April (year-end) |
Employment Allowance
The Employment Allowance allows eligible employers to reduce their employer NI liability by up to £10,500 per year (2025-26).
Navigate to Payroll > Employment Allowance.
Eligibility
| Criteria | Requirement |
|---|---|
| Employer NI Liability | Must have had Class 1 NI liability in previous tax year |
| Single Employee Exclusion | Not available to employers with only one employee who is also a director |
| Previous Year NI | Previous year employer NI must be below £100,000 |
| Connected Companies | Combined group NI considered for eligibility |
Claiming Employment Allowance
- Navigate to Payroll > Employment Allowance > Claim.
- Follow the claim wizard to verify eligibility.
- Submit the claim via EPS to HMRC.
- The allowance is applied automatically against employer NI in subsequent payruns.
Tax Codes
How Tax Codes Work
Tax codes determine how much tax-free pay an employee receives. HMRC issues tax codes via coding notices. ABBPay applies these codes automatically during payrun calculations.
Tax Code Types
| Code Suffix | Region | Description |
|---|---|---|
| L | England/Wales/NI | Standard personal allowance |
| M | All | Marriage allowance recipient (extra 10%) |
| N | All | Marriage allowance transferor (reduced 10%) |
| T | All | HMRC review required; other items to review |
| S | Scotland | Scottish tax bands apply |
| C | Wales | Welsh tax bands apply |
| K | All | Negative allowance (tax code value added to income) |
Special Tax Codes
| Code | Description |
|---|---|
| BR | Basic rate (20%) on all income; no personal allowance |
| D0 | Higher rate (40%) on all income |
| D1 | Additional rate (45%) on all income |
| NT | No tax deducted |
| 0T | No personal allowance; standard bands apply |
Emergency Tax Codes
Emergency codes are used when HMRC has not provided a specific code. They are typically applied with a Week 1 / Month 1 indicator.
Tax Basis
| Basis | Description |
|---|---|
| Cumulative | Tax calculated on year-to-date earnings (default) |
| Week 1 / Month 1 | Tax calculated on current period only (non-cumulative) |
Coding Notices
HMRC sends coding notices electronically when an employee's tax code changes. View and manage these in Payroll > Settings > HMRC > Coding Notices.
Tax Bands and Rates (2025-26)
England, Wales, and Northern Ireland
| Band | Taxable Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 - £50,270 | 20% |
| Higher Rate | £50,271 - £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
Note: The personal allowance is reduced by £1 for every £2 of income above £100,000. It reaches zero at £125,140.
Scotland
| Band | Taxable Income | Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Starter Rate | £12,571 - £15,397 | 19% |
| Basic Rate | £15,398 - £27,491 | 20% |
| Intermediate Rate | £27,492 - £43,662 | 21% |
| Higher Rate | £43,663 - £75,000 | 42% |
| Advanced Rate | £75,001 - £125,140 | 45% |
| Top Rate | Over £125,140 | 48% |
National Insurance
NI Categories
NI categories determine the rates at which employee and employer contributions are calculated.
| Category | Description |
|---|---|
| A | Standard rate for most employees |
| B | Married women and widows with reduced rate certificate |
| C | Employee over State Pension age (no employee NI) |
| D | Contracted-out standard rate (Freeport) |
| E | Contracted-out married women (Freeport) |
| F | Contracted-out standard (Freeport) |
| H | Apprentice under 25 (zero employer NI up to UST) |
| I | Contracted-out married women (Freeport) |
| J | Deferred rate (employee already paying max NI elsewhere) |
| K | Contracted-out deferred (Freeport) |
| L | Deferred Freeport |
| M | Employee under 21 (zero employer NI up to UST) |
| N | Freeport standard |
| S | Freeport deferred (mariner) |
| V | Veteran (zero employer NI up to UST for first 12 months) |
| Z | Employee under 21, deferred |
NI Thresholds (2025-26 Weekly)
| Threshold | Weekly Amount | Annual Amount | Description |
|---|---|---|---|
| LEL | £123 | £6,396 | Lower Earnings Limit |
| PT | £242 | £12,570 | Primary Threshold (employee NI starts) |
| ST | £96 | £5,000 | Secondary Threshold (employer NI starts) |
| UEL | £967 | £50,270 | Upper Earnings Limit |
| UST | £967 | £50,270 | Upper Secondary Threshold (under 21/apprentice) |
| FUST | £481 | £25,000 | Freeport Upper Secondary Threshold |
NI Rates (2025-26)
Employee NI (Category A - Standard):
| Earnings Band | Rate |
|---|---|
| Below PT (£242/week) | 0% |
| PT to UEL (£242 - £967/week) | 8% |
| Above UEL (over £967/week) | 2% |
Employer NI (Category A - Standard):
| Earnings Band | Rate |
|---|---|
| Below ST (£96/week) | 0% |
| Above ST | 15% |
Director NI Calculations
Company directors have an alternative NI calculation method. Instead of calculating NI on each pay period, director NI is calculated on an annual earnings basis, with the final period reconciling the full year.
Student Loans and Postgraduate Loans
Loan Plan Types
| Plan | Annual Threshold (2025-26) | Rate | Description |
|---|---|---|---|
| Plan 1 | £26,065 | 9% | English/Welsh pre-2012, Scottish, NI loans |
| Plan 2 | £28,470 | 9% | English/Welsh post-2012 loans |
| Plan 4 | £32,745 | 9% | Scottish post-2023 loans |
| Plan 5 | £25,000 | 9% | English/Welsh post-2023 (not active 2025-26) |
| Postgraduate | £21,000 | 6% | Postgraduate loans |
How Student Loan Deductions Work
- HMRC sends a start notice (SL1/PGL1) to the employer.
- The employee's loan plan is recorded in their profile.
- Each payrun, the system calculates the deduction based on the plan threshold and rate.
- Deductions are reported to HMRC via FPS.
- When HMRC sends a stop notice, deductions cease.
Note: An employee can have both a student loan (Plan 1, 2, or 4) and a postgraduate loan simultaneously. Both are deducted independently.
Student Loan Notices
View student loan start and stop notices from HMRC in Payroll > Settings > HMRC > Notifications.
Statutory Payments
Statutory Sick Pay (SSP)
| Element | Detail |
|---|---|
| Weekly Rate | £116.75 (2025-26) |
| Qualifying Days | 3 waiting days before SSP begins |
| Maximum Duration | 28 weeks |
| Qualifying Earnings | Must earn at or above LEL |
| Recovery | Small employers can recover SSP via EPS |
Statutory Maternity Pay (SMP)
| Element | Detail |
|---|---|
| Duration | Up to 39 weeks |
| First 6 Weeks | 90% of average weekly earnings |
| Remaining 33 Weeks | Lower of £187.18/week or 90% of AWE |
| Qualifying Period | 26 weeks continuous employment by 15th week before EWC |
| Recovery | 92% (standard) or 103% + NIC compensation (small employer) |
Statutory Paternity Pay (SPP)
| Element | Detail |
|---|---|
| Duration | 1 or 2 weeks |
| Weekly Rate | Lower of £187.18/week or 90% of AWE |
| Qualifying Period | 26 weeks continuous employment by 15th week before EWC |
| Recovery | Same rates as SMP |
Statutory Adoption Pay (SAP)
| Element | Detail |
|---|---|
| Duration | Up to 39 weeks |
| First 6 Weeks | 90% of average weekly earnings |
| Remaining 33 Weeks | Lower of £187.18/week or 90% of AWE |
| Recovery | Same rates as SMP |
Statutory Shared Parental Pay (SHPP)
| Element | Detail |
|---|---|
| Duration | Up to 37 weeks (shared between parents) |
| Weekly Rate | Lower of £187.18/week or 90% of AWE |
| Recovery | Same rates as SMP |
Statutory Payment Recovery
| Employer Type | Recovery Rate | NIC Compensation |
|---|---|---|
| Standard Employer | 92% | None |
| Small Employer | 103% | 13.8% additional |
Small Employer Definition: Previous tax year's Class 1 NI liability was less than £45,000.
Recovery amounts are claimed through the EPS submission.
P11D - Benefits in Kind
Report taxable benefits and expenses provided to employees to HMRC.
Navigate to Payroll > Year End > P11D or Payroll > Year End > Manual P11D.
Common Benefits
| Benefit | Description |
|---|---|
| Company Car | Car provided for private use |
| Car Fuel | Fuel provided for private use of company car |
| Private Medical Insurance | Health insurance paid by employer |
| Interest-Free Loans | Loans at below-market interest rate |
| Living Accommodation | Housing provided by employer |
| Telephone/Mobile | Personal use of company telephone |
| Gym/Health Club | Employer-paid membership |
| Childcare | Employer-provided childcare above exempt limits |
P11D Deadlines
| Deadline | Date |
|---|---|
| P11D Submission | 6 July following the tax year end |
| P11D(b) Submission | 6 July following the tax year end |
| Class 1A NI Payment | 22 July (electronic) or 19 July (post) |
P46 Car - Company Car Changes
Report changes to company cars mid-year. Required within 28 days of the car being made available or withdrawn.
Navigate to Payroll > Year End > Manual P46 Car.
| Trigger | Description |
|---|---|
| New Car | Employee receives a new company car |
| Car Change | Employee changes to a different car |
| Car Withdrawal | Company car is returned/withdrawn |
| Fuel Benefit Change | Car fuel benefit starts or stops |
P45 - Employee Leaving Certificate
When an employee leaves, a P45 is generated showing their pay and tax for the current tax year up to their leaving date.
| Part | Recipient |
|---|---|
| Part 1 | HMRC (submitted automatically via FPS) |
| Part 1A | Employee (for their records) |
| Part 2 | New employer |
| Part 3 | New employer |
To generate a P45: Navigate to Payroll > Employees > [Employee] > P45.
P60 - End of Year Certificate
Issued to all employees employed on 5 April. Shows total pay and tax for the full tax year.
Navigate to Payroll > Year End > P60.
Must be provided to employees by 31 May following the tax year end.
Workplace Pension Auto-Enrolment
Employer Duties
All UK employers must:
- Assess employees for pension eligibility each pay period
- Enrol eligible jobholders into a qualifying scheme
- Contribute the minimum employer contribution (3%)
- Communicate to employees about their enrolment
- Re-enrol opted-out employees every 3 years
Supported Pension Providers
| Provider | Integration |
|---|---|
| NEST | CSV export for contribution uploads |
| People's Pension | Direct connection to your People's Pension account |
| Smart Pension | Direct connection to your Smart Pension account |
| Custom Scheme | Manual configuration with any provider |
Auto-Enrolment Assessment Categories
| Category | Age | Earnings | Action |
|---|---|---|---|
| Eligible Jobholder | 22 to SPA | Above earnings trigger | Must be enrolled |
| Non-Eligible Jobholder | 16-21 or SPA-74 | Above LEL | Can opt in |
| Entitled Worker | 16-74 | Below LEL | Can request to join |
Apprenticeship Levy
Employers with a pay bill over £3 million per year must pay the Apprenticeship Levy.
| Element | Detail |
|---|---|
| Rate | 0.5% of pay bill |
| Annual Allowance | £15,000 (equivalent to £3m threshold) |
| Reporting | Reported via EPS |
CIS - Construction Industry Scheme
If your company operates in the construction industry, CIS deductions may apply.
| Element | Description |
|---|---|
| CIS Deductions Suffered | Deductions made by contractors from your payments |
| Reporting | Reported via EPS for offset against PAYE/NI liability |
Navigate to Payroll > Settings for CIS configuration.
What the UK payroll engine covers
ABBPay's UK payroll engine handles:
- PAYE income tax for all regions and tax codes
- Employee and employer National Insurance for all categories, including the alternative annual method for directors
- Student loan and postgraduate loan deductions
- Pension contributions and auto-enrolment assessment
- SSP, SMP, SPP, SAP and SHPP, including recovery
- Custom allowances and deductions
- FPS and EPS submissions to HMRC, P11D benefits in kind and P46 Car
- Employment Allowance claims and the Apprenticeship Levy
- Construction Industry Scheme processing
Key Dates and Deadlines Summary
| Deadline | Date | Description |
|---|---|---|
| FPS Submission | On or before payday | Report employee pay to HMRC |
| Monthly EPS | 19th of following month | Report statutory recoveries |
| PAYE/NI Payment | 22nd of following month (electronic) | Pay HMRC liability |
| Final FPS | 19 April | Last FPS for the tax year |
| Final EPS | 19 April | Year-end EPS with declarations |
| P60 Distribution | 31 May | Provide P60s to employees |
| P11D/P11D(b) | 6 July | Report benefits in kind |
| Class 1A NI | 22 July | Pay NI on benefits in kind |