Payroll Compliance Checklist UK 2026: Everything Employers Need to Know
The 2026 UK Payroll Compliance Checklist covers updated minimum wage rates, PAYE, NICs, pension thresholds, and record-keeping duties effective from 1 April 2026. Employers must ensure correct pay calculations, RTI submissions, and HMRC reporting to avoid penalties.
Quick Compliance Summary
- ✅ New National Living Wage (21+): £12.71/hour from April 2026
- ✅ PAYE & NIC thresholds to be updated by HM Treasury (2026 Budget)
- ✅ Auto-enrolment: qualifying earnings start from £6,240/year
- ✅ RTI submissions must be on or before payday
- ✅ Keep payroll records for at least 3 years (preferably 6 for audit safety)
Why Payroll Compliance Matters in 2026
Let’s be blunt — payroll mistakes cost more than money.
In 2025 alone, HMRC issued over £15 million in penalties for payroll and RTI reporting errors. With new minimum wage increases taking effect from 1 April 2026, staying compliant is not optional — it’s a legal and financial safeguard.
If you’re an SME owner or HR manager, this checklist is your action plan to stay compliant, protect your reputation, and avoid surprise letters from HMRC.
1. Minimum Wage & Living Wage Updates (Effective April 2026)
| Category | Hourly Rate (from April 2026) |
|---|---|
| 21 and over (National Living Wage) | £12.71 |
| 18–20 years old | £11.04 |
| 16–17 years old | £8.64 |
| Apprentices | £6.65 |
| Accommodation offset | £9.60 per day |
What to do:
- Audit all employee pay rates before April 2026.
- Update payroll software with new rates.
- Check casual or zero-hour contracts — these often slip below compliance radar.
Pro Tip:
If you pay commission or bonuses, ensure base pay alone meets the minimum before extras.
2. PAYE & Tax Code Accuracy
Employers must operate Pay As You Earn (PAYE) to collect Income Tax and National Insurance (NI) from staff pay.
Inaccurate tax codes or missed updates are among HMRC’s top triggers for audits.
Your 2026 Action Steps:
- Issue P60s to employees by 31 May 2026 for 2025–26 tax year.
- Use the latest HMRC Starter Checklist for new employees.
- Verify tax codes via HMRC Basic PAYE Tools or your payroll provider.
- Send RTI (Real Time Information) submissions every pay cycle — on or before payday.
3. National Insurance (NI) Thresholds and Categories
The Class 1 NICs thresholds may adjust in the 2026 Spring Budget, but here’s the current baseline (subject to update):
| NIC Category | Lower Earnings Limit | Primary Threshold | Upper Earnings Limit |
|---|---|---|---|
| 2025/26 (Expected) | £6,396/year | £12,570/year | £50,270/year |
Action:
- Make sure your payroll software auto-applies updated NI tables.
- Check category letters (A, B, C, H, M, Z) for employees — incorrect categories can cause overpayments or underpayments.
4. Pensions & Auto-Enrolment
Employers must automatically enrol eligible staff into a workplace pension.
Qualifying criteria for 2026 (expected):
- Aged 22 or over
- Earning at least £10,000/year
Minimum contributions:
- Employee: 5%
- Employer: 3%
Checklist:
- Reassess employee eligibility every pay period.
- Provide opt-in/out communications within 6 weeks of eligibility change.
- Submit contributions on time to the pension provider.
Common mistake: forgetting to re-enrol staff every 3 years — a frequent compliance failure.
4. Pensions & Auto-Enrolment
Employers must automatically enrol eligible staff into a workplace pension.
Qualifying criteria for 2026 (expected):
- Aged 22 or over
- Earning at least £10,000/year
Minimum contributions:
- Employee: 5%
- Employer: 3%
Checklist:
- Reassess employee eligibility every pay period.
- Provide opt-in/out communications within 6 weeks of eligibility change.
- Submit contributions on time to the pension provider.
Common mistake: forgetting to re-enrol staff every 3 years — a frequent compliance failure.
7. RTI (Real Time Information) Submission Rules
Every employer must send Full Payment Submissions (FPS) and Employer Payment Summaries (EPS) via RTI each pay period.
Checklist:
- Submit FPS on or before payday.
- Submit EPS if reclaiming statutory pay or reporting no payment.
- Fix errors via an Additional FPS (not overwriting prior data).
- Reconcile monthly via HMRC dashboard.
Reminder: HMRC can issue automatic late-filing penalties starting at £100/month.
8. Year-End & P60 Deadlines
By 31 May 2026, employers must provide a P60 to each employee who was still working on 5 April 2026.
Also remember:
- File P11D forms (benefits in kind) by 6 July 2026.
- Pay any Class 1A NICs on benefits by 22 July 2026 (electronic).
9. Common Payroll Mistakes (and How to Avoid Them)
| Mistake | Impact | Fix |
|---|---|---|
| Missed new starter declaration | Wrong tax code | Use HMRC starter checklist |
| Incorrect hourly rate | Legal breach | Update payroll before April 2026 |
| Late RTI submission | HMRC penalties | Schedule automated submission reminders |
| Missed re-enrolment | Pension fines | Use alerts from your pension provider |
| Paying below NMW | Arrears + fines | Run payroll audit quarterly |
10. Employer Penalties in 2026
HMRC can impose penalties for:
- Late RTI filings: £100–£400/month
- Incorrect PAYE returns: up to 100% of tax owed
- Underpayment of NMW: 200% of arrears
- Pension non-compliance: fines from The Pensions Regulator
Case Example:
In 2025, a small café in Bristol faced £18,000 in arrears after misclassifying part-time baristas as apprentices. One missing payroll update triggered a full HMRC audit.
Mini Table: 2026 Payroll Compliance Checklist
| ✅ Step | Task | Frequency |
|---|---|---|
| Review wage rates | Update to April 2026 NMW/NLW | Annually |
| Update PAYE & NIC | Apply new thresholds | April |
| Auto-enrol pensions | Reassess eligibility | Ongoing |
| Submit RTI | On/Before payday | Each pay run |
| Issue P60s | Provide by 31 May | Yearly |
| File P11D | Submit by 6 July | Yearly |
| Keep records | Maintain min. 3 years | Continuous |
11. Payroll Compliance Tools for 2026
Consider these systems for compliance automation:
- HMRC Basic PAYE Tools – Free for micro employers
- Xero Payroll – Real-time compliance dashboard
- BrightPay – Pensions + RTI automation
- QuickBooks Payroll – Ideal for SMEs with accountants
- Moneysoft Payroll Manager – Comprehensive RTI + FPS + P60 support
12. Preparing for 2027 and Beyond
Automation and transparency are reshaping UK payroll.
By 2027, expect:
- HMRC digital PAYE dashboards
- API-based employer portals
- AI audit tools detecting wage anomalies
Invest early — the best defence against audits is data accuracy and automation.
FAQs
Q1: How often must I submit payroll to HMRC?
Every pay period — on or before the day you pay employees.
Q2: Can I correct a mistake after filing?
Yes. Send an Additional FPS with the corrected figures.
Q3: Do I need to keep paper payslips?
No. Digital copies are valid if they’re accessible and complete.
Q4: What if I pay below the minimum wage accidentally?
You must repay arrears at the current rate and may face penalties.
Q5: How can small businesses stay compliant affordably?
Use HMRC-compliant payroll software and schedule quarterly self-audits.