Running payroll may appear straightforward when a business has only a handful of employees. Calculate each person’s pay, deduct tax and National Insurance, issue payslips and transfer the money. However, beneath that familiar process sits a detailed reporting system with strict deadlines, technical data requirements and consequences for getting information wrong.
Under Real Time Information, commonly known as RTI, payroll is not simply an internal calculation. Almost every payday creates a reporting obligation to HM Revenue & Customs. The employer must submit accurate information at the correct time, use the correct payment date and ensure that year-to-date figures remain consistent throughout the tax year.
This is where many small businesses encounter difficulties. Payroll information may arrive late, employees may be added incorrectly, irregular payments may be overlooked or an employer may assume that purchasing payroll software guarantees compliance. The result can be rejected submissions, unexpected PAYE balances, incorrect employee tax records and possible penalties.
Businesses searching for reliable payroll services Leeds support therefore need more than someone who can produce payslips. They need a payroll process that protects their wider PAYE position.
What Is RTI and Why Does It Matter?
RTI is the system through which employers report payroll information to HMRC whenever employees are paid. The two principal submissions are the Full Payment Submission and the Employer Payment Summary.
A Full Payment Submission, or FPS, reports information including employee pay, Income Tax, National Insurance contributions, student loan deductions, statutory payments and other relevant payroll data. Under HMRC’s general rule, the FPS must reach HMRC on or before the employee’s payday.
An Employer Payment Summary, or EPS, is used where the employer needs to report information that is not included on the FPS. This may include recoverable statutory payments, an Employment Allowance claim, Construction Industry Scheme deductions suffered by a limited company or confirmation that no employees were paid during a particular tax month.
The information reported through RTI affects the amount HMRC expects the employer to pay. It also feeds into individual employees’ tax records and may affect matters such as tax codes, student loan deductions and benefit calculations.
An RTI mistake is therefore not merely an administrative error. It can affect the employer, the employee and HMRC’s understanding of the payroll.
The Most Common Error: Submitting the FPS After Payday
The most fundamental RTI rule is also one of the most frequently misunderstood. Employers must normally submit the FPS on or before the date employees are paid.
This means the actual contractual payday reported through payroll is critical. If employees are paid on the final Friday of each month, the FPS should normally be submitted no later than that Friday. It is not sufficient to complete the payroll several days later simply because the employer intends to pay HMRC at the end of the following month.
HMRC’s guidance on reporting payroll information confirms that the FPS deadline applies even where an employer pays its PAYE bill quarterly.
Some businesses treat payroll as a retrospective bookkeeping exercise. Wages are transferred first, payslips are produced later and the RTI submission is completed when someone has time. That approach creates an immediate risk of late filing.
An outsourced provider can only file on time if the business supplies the required information before payroll is due. A reliable payroll process therefore needs internal cut-off dates for timesheets, overtime, bonuses, commission, sickness, family leave and starter or leaver information.
Filing the FPS and Paying HMRC Are Different Obligations
A common source of confusion is the difference between the FPS deadline and the PAYE payment deadline.
The FPS is generally due on or before payday. The employer’s PAYE bill is normally payable later. Monthly electronic payments must usually reach HMRC by the 22nd of the following tax month. Payment by post must generally arrive by the 19th.
For example, if employees are paid on 30 September, the FPS will normally be due by 30 September. The related PAYE payment will ordinarily be due electronically by 22 October.
Employers that usually pay less than £1,500 per month may be permitted to pay HMRC quarterly, but this does not convert RTI into a quarterly reporting system. FPS submissions are still generally required whenever employees are paid.
The distinction is explained in HMRC’s PAYE payment guidance. Confusing these two deadlines is one of the easiest ways for an otherwise organised employer to create repeated RTI submission errors.
Late Payroll Information Creates Late or Inaccurate Returns
Many RTI problems begin before the payroll provider opens the software.
A manager may approve overtime after the payroll has been processed. A restaurant may not finalise shift data until after payday. A construction company may receive site timesheets late. A sales business may calculate commission retrospectively, or an owner-managed company may decide on a director’s bonus without considering when it legally became payable.
The payroll operator is then forced to choose between delaying the submission, processing incomplete figures or filing an additional correction. None of these outcomes is desirable as a routine process.
Businesses should establish a formal payroll timetable identifying:
- The date payroll information must be supplied
- Who is responsible for approving variable payments
- When the draft payroll will be reviewed
- When employees will receive their payslips
- When the FPS will be submitted
- Who will authorise the PAYE payment
Occasional corrections are unavoidable, but repeated last-minute changes usually indicate that the payroll process itself needs attention.
Incorrect Starter Information Can Affect Several Pay Periods
A new employee should not simply be added to payroll using their name and agreed salary.
The employer needs accurate personal information, a start date, National Insurance number where available and details from the employee’s P45. If a valid P45 is unavailable, the employer should obtain the appropriate starter declaration so that the correct initial tax treatment can be applied.
HMRC provides a starter checklist for PAYE for employees who cannot provide a P45. The employee’s declaration helps determine the tax code that should initially be used and whether student or postgraduate loan deductions may be required.
Mistakes commonly arise when an employee submits a P45 after payroll has already been processed, fails to complete the starter declaration or selects the wrong statement. Employers may also overlook student loan plan information. This has become increasingly important with the introduction of deductions relating to Plan 5 loans from April 2026.
Payroll staff should not guess an employee’s tax code or loan plan. They must use the information available, apply HMRC notices correctly and retain appropriate records showing how the employee was set up.
An error during onboarding can continue through several pay periods before either the employee or HMRC identifies it.
Duplicate Employee Records Can Corrupt Year-to-Date Figures
Duplicate payroll records often appear when a business changes software, moves to a new payroll provider or re-employs a former member of staff.
If an existing employee is created as a completely new person without the correct payroll identity and year-to-date information, HMRC may interpret the submissions as relating to two separate employments. This can produce confusing tax records and discrepancies between payroll reports and HMRC’s figures.
The employee’s payroll ID is especially important. Where that identifier changes, the FPS must contain the appropriate indicator so that HMRC understands that the new ID replaces the old one.
Similar problems can occur if an employee’s name, date of birth or National Insurance number differs between systems. Minor formatting differences may be manageable, but substantially inconsistent personal information can make it difficult to match payroll submissions correctly.
Any payroll migration should therefore include a reconciliation of employee identities, opening balances, cumulative pay, tax, National Insurance, student loan deductions and statutory payment records.
The Wrong Payment Date Can Put Earnings in the Wrong Tax Period
The UK tax month runs from the 6th of one calendar month to the 5th of the next. An incorrect payment date can therefore place earnings in the wrong tax month or even the wrong tax year.
This is particularly dangerous around 5 April. Reporting a payment as made on 5 April rather than 6 April can change the tax year in which the earnings appear. It may affect tax calculations, National Insurance, year-end reports and the employee’s P60.
Payment-date mistakes also arise around weekends and bank holidays. Where employees are paid early because their normal payday falls on a non-banking day, HMRC generally allows the employer to report the contractual payday as the payment date. The submission should still be made on or before the actual date the employees receive their money.
HMRC’s guidance on aligning payroll with the correct tax period should be reviewed where a payday has been reported incorrectly or the business is changing its regular payroll date.
Employers should never alter a payment date merely to avoid a late-submission indicator. The date reported must reflect the applicable payroll rules and the real payment arrangements.
Irregular and Additional Payments Are Easily Missed
Not every payment to an employee is made through the normal monthly payroll run.
An employer may make a separate bonus payment, advance wages, reimburse an amount that is actually taxable, pay holiday pay to a departing employee or transfer money to a director outside the regular payroll timetable.
These payments still need to be considered for PAYE and RTI purposes. Depending on the circumstances, they may be included in the next regular FPS or require an additional FPS.
Problems arise when the person making the bank payment does not tell the payroll operator. The payroll reports then show one amount while the employee has received another. This can lead to incorrect deductions, incomplete year-to-date figures and unexplained differences during reconciliation.
Businesses should require every payment to an employee or director to be reviewed before it is released. Describing a payment as an advance, expense, loan or bonus does not determine its tax treatment.
Employers Forget to Submit an EPS
The FPS is the most familiar RTI return, but the EPS is equally important in the right circumstances.
An EPS may be required when the employer:
- Did not pay any employees during a tax month
- Is reclaiming qualifying statutory payments
- Is claiming the Employment Allowance
- Is reporting Construction Industry Scheme deductions suffered as a limited company
- Needs to report certain adjustments that reduce the amount payable to HMRC
HMRC generally needs to receive the EPS by the 19th following the end of the relevant tax month for the adjustment to be applied to that period. If it arrives after the deadline, the reduction may not appear until the following tax month.
Full details are available in HMRC’s Employer Payment Summary guidance.
A missing EPS can cause HMRC’s online account to show a higher liability than the employer expects. If HMRC is expecting an FPS and receives neither an FPS nor confirmation that no employees were paid, it may also estimate what it believes the employer owes.
Submitting an EPS is not simply a year-end exercise. Its necessity should be considered during every tax month.
Corrections Are Made in the Wrong Way
When a payroll error is discovered, some employers attempt to delete the original return, reverse an entire payroll or resubmit the same figures. This can make the discrepancy worse.
Most current-year pay and deduction errors are corrected by submitting the correct year-to-date figures through the next regular FPS or an additional FPS. The method depends on what was wrong, when the error was found and whether the employee has been underpaid or overpaid.
EPS errors are usually corrected by reporting the accurate year-to-date value in a later EPS. The new submission should reflect the cumulative position rather than merely adding or subtracting an unexplained adjustment.
HMRC’s payroll correction guidance explains the available routes.
Corrections relating to an earlier tax year require particular care. For example, after 20 April following the end of the tax year, corrections are generally made by sending an FPS containing the corrected year-to-date figures for the relevant year.
Before submitting a correction, the employer should establish:
- What was originally reported
- What should have been reported
- Whether the employee’s net pay must be adjusted
- Which cumulative figures need to change
- Whether the correction affects the amount payable to HMRC
A payroll correction should solve a defined problem. Sending repeated submissions without understanding the year-to-date position can produce duplicate or contradictory records.
PAYE Is Not Reconciled to HMRC’s Account
Producing payslips is only one part of payroll compliance.
After submitting the FPS and any EPS, the employer should reconcile the payroll reports against the amount HMRC expects. This normally involves checking Income Tax, employee and employer National Insurance, student and postgraduate loan deductions, statutory payment recovery, CIS deductions and any Employment Allowance applied.
A difference may arise because a submission was rejected, an EPS missed its deadline, a previous payment was allocated incorrectly or the wrong payment reference was used. It may also result from an internal payroll error.
Businesses should not automatically pay the figure they expected without investigating HMRC’s balance. Equally, they should not overwrite their payroll records simply to force them to agree with an unexplained HMRC figure.
A regular reconciliation gives the employer time to resolve discrepancies before they accumulate across several tax months.
New Starters and Leavers Are Reported Too Late
Employee changes often cause RTI errors because the payroll team is informed after the event.
For starters, the employer needs the correct commencement date and starter information before the first payment. For leavers, the final FPS should include the leaving date and final pay. The employee should also receive a P45.
If the leaving date is omitted, HMRC may continue treating the employment as active. If an employee is incorrectly marked as having left, the payroll record may need to be reopened or replaced, creating additional complications.
Special attention is needed where an employee receives a payment after leaving. The tax treatment and FPS reporting may differ from an ordinary final salary payment, particularly if a P45 has already been issued.
Managers should therefore notify payroll as soon as an offer is accepted, notice is given or a termination date changes. Waiting until payday leaves very little time to apply the correct treatment.
Directors Create Additional Payroll Complexity
Many small limited companies employ one or more directors, sometimes alongside a small team.
Directors are employees for PAYE purposes, but their National Insurance calculations can operate differently from those of ordinary employees. The annual or alternative calculation method must be applied correctly, and changes in appointment date may affect the calculation.
Owner-directors may also take irregular salary payments, benefits, expenses, loans or bonuses. These should be reviewed properly rather than entered into payroll at year end without considering when they were paid or became due.
A low salary does not remove the company’s payroll obligations. Even where little or no PAYE is payable, accurate RTI reporting may still be necessary to protect the director’s contribution record and maintain the company’s compliance position.
Payroll Software Does Not Guarantee PAYE Compliance
Modern payroll software can calculate deductions, generate payslips and communicate with HMRC, but it cannot make every compliance decision for the employer.
Software does not know whether a payment was taxable if it was entered as a reimbursement. It cannot determine whether a worker has been classified correctly if the business treats them as self-employed. It cannot identify an undisclosed bonus, chase a missing P45 or confirm whether a director’s payment was salary, dividend or loan.
It will also reproduce incorrect input with impressive consistency. A wrong tax code, National Insurance category, payment date or student loan plan can continue across every subsequent payroll run until someone notices.
Professional payroll support combines suitable software with human review, documented processes and reconciliation. The value lies not only in pressing the submission button, but in understanding what should be submitted.
What Penalties Can RTI Errors Trigger?
HMRC may charge penalties where an FPS is filed late or an expected submission is not received.
The monthly late-filing penalty depends on the number of employees in the PAYE scheme. It is currently £100 for schemes with one to nine employees, £200 for ten to 49 employees, £300 for 50 to 249 employees and £400 for schemes with 250 or more employees.
HMRC generally does not charge a late-filing penalty for the first default in a tax year, subject to the detailed rules. There is also a limited three-day easement under which a penalty will not normally be charged when the FPS arrives within three days of payday. However, the legal filing deadline remains on or before payday, and employers that repeatedly rely on the easement may still face compliance action.
If a filing failure continues for more than three months, HMRC may consider a further penalty based on the tax and National Insurance that should have been reported.
HMRC explains the current approach in its guidance on late payroll reporting.
Late PAYE payments can also attract daily interest and penalties. The penalty percentage may increase according to the number of late-payment defaults during the tax year, with additional charges possible where amounts remain unpaid for six or twelve months.
Penalties are therefore only part of the risk. Persistent RTI failures can require substantial time to investigate and may affect the employer’s relationship with both HMRC and its employees.
What If an FPS Has to Be Submitted Late?
If an FPS is submitted after payday, the payroll software will usually ask the employer to select a late-reporting reason.
Valid reasons can include certain cases involving a reasonable excuse, payments made without the employer’s knowledge or specific circumstances permitted under HMRC’s rules. The correct reason should be selected honestly and supported by appropriate records.
A late-reason code does not automatically prevent a penalty. It gives HMRC information about why the deadline was missed.
The employer should not change the reported payday to the submission date simply to make the return appear punctual. Doing so could place the payment in the wrong tax period and create a more serious data problem.
If the delay resulted from illness, a software failure or another exceptional event, evidence should be retained in case HMRC later issues a penalty. Employers can appeal a penalty where they have a reasonable excuse, but ordinary pressure of work or forgetting the deadline will not normally be sufficient on its own.
Year-End Payroll Creates Its Own Risks
The end of the tax year requires more than completing the final monthly payroll.
The employer must indicate that the relevant FPS or EPS is its final submission for the year and ensure that cumulative pay and deductions are correct. If nobody is paid during the final tax month, the year-end declaration may need to be made through an EPS.
Employees who remain employed on 5 April must generally receive a P60 by 31 May. Where taxable benefits have not been processed through payroll, P11D and P11D(b) reporting may also be required by 6 July following the end of the tax year.
HMRC’s final payroll reporting guidance explains the year-end submission process.
Year-end should not be treated as the first opportunity to reconcile payroll. If errors have accumulated throughout the year, resolving them immediately before the final submission can be difficult and time-consuming.
Monthly checks create a much more reliable year-end process.
Payroll Records Must Be Retained
Employers must retain records showing what employees were paid, the deductions made and the information reported to HMRC.
PAYE records generally need to be kept for three years from the end of the tax year to which they relate. Relevant records may include payroll reports, employee details, tax code notices, payment records, statutory payment calculations, expense information and evidence supporting deductions or corrections.
HMRC’s PAYE record-keeping guidance explains the core requirements.
Automatic-enrolment pension records are subject to separate retention periods, with many records needing to be kept for six years and opt-out notices generally retained for four years.
A payroll provider should therefore do more than email payslips. The employer needs an organised archive of submissions, HMRC acknowledgements, payment reports and employee documentation.
Payroll and Pension Duties Must Work Together
Pension auto-enrolment is not part of RTI, but the two processes rely on much of the same payroll data.
Employee age, earnings and pay frequency determine whether a worker must be assessed and what contributions may be required. Late or incorrect payroll information can therefore lead to incorrect pension assessments as well as PAYE errors.
Changes to earnings, postponement dates, opt-ins, opt-outs and worker status must be communicated to the pension provider accurately. Contribution files should also be reconciled to the deductions shown on payslips.
A payroll process that files a correct FPS but sends an incorrect pension schedule is still incomplete. Effective PAYE compliance Leeds support should consider the full payroll cycle rather than treating each submission in isolation.
What Professional Payroll Services Should Include
A dependable payroll service should begin with a clear timetable and defined responsibilities. The employer must know when information is required, and the provider must understand who can authorise payroll changes.
The service should ordinarily cover employee setup, payroll calculations, payslips, FPS and EPS submissions, starter and leaver processing, statutory payments and PAYE reports. Depending on the engagement, it may also include pension assessment, contribution schedules, year-end reporting and support with HMRC correspondence.
More importantly, the provider should review payroll information for obvious inconsistencies. An unexplained change in net pay, duplicated employee, unusual tax code, negative cumulative deduction or unexpected HMRC balance should be investigated rather than accepted automatically.
Businesses comparing payroll services Leeds providers should therefore ask:
- Who reviews the payroll before submission?
- How are changes authorised?
- What is the monthly information deadline?
- Are FPS and EPS acknowledgements retained?
- Is the HMRC liability reconciled?
- Who handles correction submissions?
- Are pension duties included or separately charged?
- What happens if information is supplied late?
The cheapest payroll quotation may cover only basic processing. The real question is whether the service gives the employer confidence that its employees and HMRC obligations are being handled correctly.
How Tax Consultant Supports Leeds Employers
Tax Consultant provides payroll support designed around accuracy, deadlines and clear communication.
We can help Leeds businesses calculate employee pay, issue payslips, process starters and leavers and submit the required FPS and EPS reports. We can also review statutory payments, student loan deductions, director payroll arrangements and the amount payable to HMRC.
Where previous RTI submission errors have occurred, we can examine the payroll records, HMRC submissions and year-to-date figures to identify the source of the discrepancy. The appropriate correction can then be prepared without creating unnecessary duplicate records.
Our support can also include reviewing payroll timetables, helping employers collect information consistently and reconciling PAYE liabilities before payment deadlines.
Businesses searching for payroll services Leeds often want to save time. A well-managed service should do more than that: it should reduce uncertainty, improve employee confidence and protect the employer’s compliance position.
Final Thoughts
Small businesses rarely get RTI wrong because they intend to ignore their payroll duties. Problems usually arise because the business underestimates how many decisions sit behind an apparently simple payslip.
The employer must determine who should be on payroll, collect accurate starter information, apply the correct tax treatment, use the correct payment date, report every relevant payment and submit the FPS on time. It must also consider whether an EPS is needed, reconcile the PAYE balance, pay HMRC by the correct deadline and retain supporting records.
Software can assist with these tasks, but it cannot replace an organised process and informed review.
If your business has received an unexpected HMRC PAYE balance, repeatedly filed late submissions or simply wants greater confidence in its payroll, contact Tax Consultant. Professional payroll support can help correct existing problems and establish a more reliable process for future pay periods.
Frequently Asked Questions
1. When must an employer submit an FPS to HMRC?
An FPS must normally be submitted on or before the date employees are paid. The deadline applies each time a payment is made, even where the employer pays its PAYE bill quarterly. Limited exceptions exist, but employers should not routinely treat the three-day penalty easement as an extension of the legal deadline.
2. What is the difference between an FPS and an EPS?
An FPS reports payments and deductions for individual employees, including salary, Income Tax, National Insurance and student loan deductions. An EPS reports employer-level information that is not included on the FPS, such as no employee payments for a tax month, recoverable statutory payments, Employment Allowance claims and certain CIS deductions. An EPS affecting the current liability should generally reach HMRC by the 19th following the relevant tax month.
3. How do I correct an RTI submission error?
The correct method depends on the type of error and when it is discovered. Current-year pay and deduction errors are commonly corrected by reporting accurate year-to-date figures through the next FPS or an additional FPS. EPS errors are normally corrected using accurate cumulative figures on a later EPS. Employers should identify exactly what was wrong before sending another submission, as an unnecessary duplicate FPS may make the position worse.
4. Can HMRC penalise a small business for filing payroll late?
Yes. For a PAYE scheme with one to nine employees, the standard monthly late-filing penalty is currently £100. The amount rises for larger schemes. HMRC generally allows the first filing default of the tax year without a penalty, subject to the detailed rules, and may not charge where a submission is no more than three days late. However, repeated or extended failures can still lead to penalties and compliance action.
5. Why should a Leeds business outsource its payroll?
Outsourcing can provide access to experienced payroll support, reliable filing procedures and clearer monthly reporting. A professional provider can help manage FPS and EPS deadlines, starters, leavers, statutory payments, pension data and PAYE reconciliation. The employer remains legally responsible for its obligations, but an effective payroll service substantially reduces the risk of missed deadlines and inaccurate submissions.
