Payroll rules can feel daunting, especially when new tax years bring fresh obligations. We understand how important it is to keep your business running smoothly while staying on top of these responsibilities. Here at Wells Associates, we see many employers wrestling with payroll compliance, so we have gathered our top questions and answers to shed some light on what is required for the 2025/26 tax year.
Payroll tax requirements for 2025/26
You must operate Pay As You Earn (PAYE) on all employee payments that exceed the personal allowance. For the 2025/26 tax year, the personal allowance is expected to stay at £12,570. Earnings above that threshold attract income tax at rates set out by HMRC. At the same time, National Insurance contributions (NICs) apply for most employees once their pay rises above £12,570 per year, with different rates up to and beyond the upper earnings limit.
Employers also pay Class 1 secondary NICs on employee wages above £9,100 (this figure has been frozen in recent years, but always check the latest guidance from HMRC). Some smaller businesses can claim Employment Allowance (currently £5,000) to reduce their Class 1 secondary NICs each year. It is vital to confirm if your business qualifies for this allowance, as it can lower overall payroll costs.
Key deadlines and how to meet them
HMRC expects your Real Time Information (RTI) submissions to arrive on or before the date you pay your employees. You must file a Full Payment Submission (FPS) that confirms how much you have paid your staff and how much tax and NICs you owe. If you don’t plan to pay employees in a given pay period, you may need to submit an Employer Payment Summary (EPS) instead.
Monthly or quarterly payment of PAYE and NICs also needs to reach HMRC on time. Most employers pay monthly, due by the 22nd (or the 19th if you pay by post). If your average monthly liability is below £1,500, you might choose quarterly payments. Late or missed submissions could trigger penalties, so consider setting calendar reminders or using payroll software that flags upcoming deadlines.
Payroll software options
A good payroll system can remove much of the manual workload. Software packages help you calculate employee pay, tax, and NICs, and they can file your RTI returns directly to HMRC. Many offer features like payslip generation, pension calculations, and year-end reporting.
Popular options include Sage Payroll, Xero Payroll, and QuickBooks Payroll. If you only have a few employees, HMRC provides Basic PAYE Tools (free of charge) for smaller employers. We encourage you to review user feedback for each system and see which best suits your needs.
Employees vs. contractors
Business owners sometimes ask whether it’s better to engage someone as a contractor rather than hire them as an employee. The answer depends on their working arrangements. True contractors usually decide their own hours, provide their own equipment, and carry their own financial risk. Employees, on the other hand, work under an employment contract, follow a set schedule, and use company resources.
You must assess each person’s status correctly for payroll compliance. If they qualify as an employee, you must operate PAYE and NICs on their earnings. If they fall under the off-payroll working rules (sometimes called IR35) and they are effectively operating as an employee through a personal service company, you must process their pay with the right deductions. If in doubt, contact us or check HMRC’s guidance on employment status.
Penalties for non-compliance
HMRC imposes penalties if you fail to file correct RTI submissions on time, underpay tax, or classify workers incorrectly. Some penalties start with a fixed amount per missed deadline, and they can escalate if the problem continues. Companies House might also take action against directors for failing to meet certain filing obligations, although that generally relates to annual accounts and confirmation statements.
Financial losses from penalties can quickly add up. They can also damage your reputation with staff, suppliers, and lenders. We suggest keeping a close watch on record-keeping standards and ensuring your payroll data is accurate. If you slip behind, speak to HMRC or a qualified adviser for help.
Our practical approach
We know it’s easy to worry about the administrative side of payroll. Our team stays up-to-date with HMRC announcements, and we use that knowledge to support businesses in meeting their 2025/26 obligations. Feel free to explore our services page to see how we can help. We prefer a straightforward and personal style of guidance – you won’t get lost in red tape with us.
You might also want to read the official HMRC guidance on PAYE or visit Companies House for director duties if you need more details on filing accounts and other legal responsibilities. And if you have questions, drop us a line so we can talk through your unique circumstances. We’re here to make things clearer.
How we can help
As your reliable adviser, we combine professional knowledge with a relaxed, friendly service. Our priority is to keep you informed of changes and deadlines, and we handle payroll and accounts so you can focus on running your business. At Wells Associates, we look at every case individually – whether you have one employee or hundreds on the books. Visit our website or call our team for more details.
Need help with payroll compliance? Get in touch and we’ll show you how simple it can be to pay your people with confidence.