How to Pay Employers' PAYE to HMRC

The Employer’s Guide to Paying HMRC PAYE

Navigating HMRC’s PAYE (Pay As You Earn) payments can seem daunting – especially for new or small employers. This comprehensive guide walks you through every step, arming you with the confidence to manage your payroll obligations and avoid costly penalties.

What Exactly Is PAYE?

Pay As You Earn (PAYE) is the method HMRC uses to collect tax and National Insurance contributions from your employees as they earn. As an employer, you act as the conduit, deducting these sums from staff salaries and paying them over to HMRC – on time, every time.

PAYE payments cover:

• Income Tax
• Employee’s and Employer’s NICs (National Insurance Contributions)
• Student and Postgraduate Loan deductions
• Construction Industry Scheme (CIS) deductions (if applicable)
• Apprenticeship Levy (over £3m annual pay bill)
• PAYE Settlement Agreement amounts
• Class 1A/1B NIC on benefits/expenses
• Less any statutory payment recoveries (maternity, paternity, etc.)

"Getting payroll right is one of the most empowering things you can do for your business and your team."

Key Payment Deadlines: Never Miss a Date

Missing a PAYE deadline can trigger automatic penalties and interest. Here’s when you must pay:

• Monthly Payers: Funds must reach HMRC by the 22nd of the next tax month (or by the 19th if posting a cheque).
• Quarterly Payments: Permitted if your average monthly PAYE/NIC is under £1,500.

PAYE Payment Quarters and Deadlines

Important: If the deadline falls on a weekend/bank holiday, payment must clear by the last working day before.

Annual Deadlines

• Class 1A NIC (benefits): 19/22 July
• PSA (Class 1B NIC): Same as above

How To Pay HMRC: Your Options Explained

There are many ways to pay – each with its own quirks, deadlines, and setup requirements.

• Direct Debit: Now with variable DD, can be set up in your Business Tax Account. HMRC pulls owed amount each period, but it’s your duty to submit payroll returns on time.
• Online portal: Log in to your GOV.UK business tax account.
• Bank Transfer (Faster Payments, BACS, CHAPS):
  • Sort code: 08-32-10
  • Account number: 12001039
  • Account name: HMRC Cumbernauld
• Debit card: Via the online portal.
• Cheque: Only with HMRC-printed slip. Booklets were ended April 2024.
• Via your bank or building society: Only if you still have a valid payment booklet.

Many employers find variable Direct Debit the easiest way to avoid missing a deadline—payroll software links make submitting returns and payments seamless. First setup takes 5 working days; subsequent payments clear in three.

Using the Right Payment Reference

Every PAYE payment must quote your 13-character Accounts Office Reference. Find it on HMRC letters and your P30 form.

• Late/Early payments: Add the tax year and month at the end (e.g., ‘2501’ for April 2024/25, month 1).

Calculating Your PAYE Payment

Payroll software, or HMRC’s Basic PAYE Tools, makes calculating your monthly (or quarterly) due simple.

Your payment equals:

1. Total tax and NICs withheld from employees
2. Plus employer’s (Class 1) NIC (minus any employment allowance)
3. Plus student loans, apprentice levy, CIS if applicable
4. Less any statutory recoveries/refunds (e.g., maternity pay)

"If your recoveries/refunds are higher than your liabilities, you can offset the negative amount or claim a refund after the year-end."

If there’s no payment due (e.g., you didn’t pay any staff that month), submit an Employer Payment Summary (EPS) so HMRC doesn’t chase you for missing payments.

Example Table

Key Employer References Explained

To pay or correspond with HMRC, you need your Employer PAYE Reference (format: 123/AB456) and Accounts Office Reference (format: 123AB45678901). They are not the same! Always double-check you’re using the correct reference for each service and payment.

Deductions, Reductions, and Special Cases

• Employment Allowance: Eligible small employers can claim £5,000 off their annual employer NIC bill. File a claim via your EPS, but check eligibility first (not for single-director companies without staff).
• Reduced Employer NICs: For employees under 21, apprentices under 25, veterans (first year), and some Freeport employees.
• Apprenticeship Levy: Only applies if your annual payroll exceeds £3 million.

Other Amounts Paid Via PAYE

• Student/Postgrad Loans
• Attachment of Earnings Orders
• CIS (if you’re a construction contractor)

What Happens If You Get It Wrong?

Mistakes happen. The key is acting quickly:

• Underpaid? Top up immediately to reduce penalty/interest.
• Overpaid? Offset against next period or request a refund.
• Payroll errors? File corrected returns (FPS/EPS) via your payroll software.

If you can’t pay, contact HMRC’s Business Payment Support Service immediately (0300 200 3401). A “Time to Pay” agreement could spare you the worst penalties, but act before the deadline.

Avoiding Penalties: Essential Practices

• Submit all payroll returns (FPS/EPS) in good time.
• Always use correct payment reference numbers.
• Keep clear, up-to-date records of calculations and payments (HMRC can ask for 3 years of proof).
• Claim Employment Allowance in time (or risk missing out).

Penalty Table

Recent Updates: Don’t Get Caught Out

• Direct Debit upgrades: Variable-pay DD now lets you forget about manual payments. Only the employer can set this up, not your agent.
• Cheque vouchers discontinued: No more payment booklets issued from April 2024. Switch to electronic methods.

Quick FAQs

• What if no PAYE is due this month? Submit an EPS via your online PAYE account.
• Can I pay by credit card? No, only debit card or bank transfer.
• What if I pay late by Direct Debit? As long as HMRC collects promptly after the due date, no penalty.
• How do I get my payment reference? On any HMRC letters, P30, or in your HMRC account.

Final Thoughts & Call to Action

Paying employers’ PAYE to HMRC punctually and precisely is part of being a responsible employer. The system isn’t perfect – but the consequences of mistakes are real. Take time now to check your payroll system, claim all you’re entitled to, and, above all, never ignore a payment reminder.

Further Reading and Help:

• Visit GOV.UK: PAYE for Employers for more, including direct links for payment and support.
• Need guidance or in trouble? Call HMRC PAYE Helpline: 0300 200 3401.

Managing payroll is about more than compliance: it’s also about providing dignity and certainty for the people who depend on you. Take it seriously—and you’ll never regret it.