A Practical Guide to UK Payroll Reporting: RTI, P60s and P11Ds for Founders

A Founder’s Guide to UK Payroll Reporting: RTI, P60s, and P11Ds

For UK startup founders, managing payroll can feel like a secondary, often frustrating, task. Beyond simply paying your team, you are responsible for a strict reporting system to His Majesty's Revenue and Customs (HMRC). The process is a combination of a consistent monthly rhythm and a critical annual wrap-up. Missing a deadline or misinterpreting a rule does not just create administrative headaches; it leads to automatic penalties that directly impact your runway. Understanding the core components is essential for maintaining compliance and avoiding unnecessary costs while you focus on building your business.

This guide explains how to submit payroll reports to HMRC, covering the monthly Real-Time Information (RTI) system and the crucial year-end forms like the P60 and P11D. We will cover the deadlines, common mistakes, and how to choose the right system for your company’s stage.

Part 1: The Monthly Rhythm of HMRC Payroll Compliance

UK payroll compliance operates on a system called Real-Time Information, or RTI. This means that instead of sending a single large report at the end of the year, you submit a live feed of information to HMRC every time you pay your employees. For most tech and professional services startups, this process is managed within payroll software like Xero, which automates much of the submission process.

The Full Payment Submission (FPS): Your Core Monthly Report

The most important submission in this monthly cycle is the Full Payment Submission (FPS). This digital report contains the payment and deduction details for every employee for that specific pay period, including gross pay, income tax, and National Insurance contributions. The core rule is non-negotiable: The Full Payment Submission (FPS) must be sent to HMRC 'on or before' each employee's payday. This is the fundamental action of UK payroll reporting.

Submitting it even a day late can trigger an automatic penalty. For small businesses, the consequences are clear and immediate. HMRC's automated penalty for late FPS submissions for companies with 1-9 employees is £100 per month. This is an easily avoidable cost for a lean startup. You can track recurring deadlines in our Companies House filing calendar to stay ahead.

The Employer Payment Summary (EPS): Reporting Exceptions

While the FPS is for when you are paying people, another key submission is used for specific situations. An Employer Payment Summary (EPS) is submitted for tax months with no employee payments or to reclaim statutory payments (e.g., maternity pay). A UK tax month runs from the 6th of one month to the 5th of the next.

For example, a pre-revenue deeptech startup with grant-funded founders might not run a payroll in its early months. An EPS informs HMRC that no payment is due. Similarly, if you have reclaimed Statutory Maternity Pay for an employee, the EPS is how you report this to HMRC to ensure your PAYE account is accurate.

Managing Starters and Leavers: The P45

This regular rhythm also includes managing team changes. When an employee joins or leaves your company, their tax information needs to be handled correctly to ensure they pay the right amount of tax. The key document here is the P45.

• For Starters: Your payroll software uses the P45 from a new employee's previous job to set their correct tax code. If a new hire does not have a P45, they must complete a "Starter Checklist" (formerly known as a P46), which gathers the necessary information for you to assign a tax code.
• For Leavers: You must provide a P45 to any employee who leaves your company, without exception. This document summarises their pay and tax details for the current tax year up to their leaving date.

Part 2: The Annual Wrap-Up: Understanding P60 and P11D Forms

Once you have the monthly RTI rhythm established, the next focus is the year-end process. This is not just a final payroll run; it involves producing key summary documents for both your employees and HMRC. All of this is tied to the government's fiscal calendar, as the UK tax year runs from 6 April to 5 April.

The P60: An Annual Summary for Your Team

At the end of the tax year, every employee still on your payroll needs a consolidated summary of their total earnings and the deductions they have paid. This document is the P60, ‘End of Year Certificate’. It’s a crucial piece of financial information for them, often required for mortgage applications, loan requests, or self-assessment tax returns. Your responsibility as an employer is straightforward but has a strict deadline. A P60 must be provided to every employee on payroll on 5 April by the deadline of 31 May. Most modern payroll systems can generate and distribute these automatically, but the legal responsibility for timely delivery remains with you.

The P11D: Reporting Taxable Benefits for Startups

This is where many early-stage companies make mistakes. As you grow, you begin offering perks and benefits to attract and retain talent. While great for company culture, many of these are considered a taxable 'Benefit in Kind' (BIK) by HMRC. In practice, we see that founders often overlook these until the deadline is looming. A P11D form is used to report benefits or expenses provided to employees and directors that are not included in regular salary.

Common examples in the startup ecosystem include:

• Private Medical Insurance: A biotech company offering health coverage to its R&D team must report the value of the insurance premiums on each employee's P11D.
• Gym Memberships: If your SaaS company pays for the team's gym access, the annual cost per employee is a taxable benefit.
• Beneficial Loans: If a founder takes a loan from the company for a personal expense, it may need to be reported. Interest-free or low-interest loans to directors/employees over £10,000 are a reportable beneficial loan.
• Company Cars: Providing a car that is available for private use is a classic BIK that must be reported.

Reporting these benefits has a direct cost to the company. Companies pay Class 1A National Insurance on the value of most benefits, which was 13.8% as of the 2023/24 tax year. This is a tax paid by the employer, not the employee, and it can be a significant, unbudgeted expense if not planned for.

The deadlines for the P11D process are firm. The deadline to file P11D and P11D(b) forms with HMRC and provide copies to employees is 6 July. The P11D(b) is the employer's declaration of the total benefits paid and the Class 1A NICs due. Following this, the deadline to pay Class 1A National Insurance is 22 July (or 19 July if paying by cheque).

An alternative to this annual reporting scramble is 'payrolling' benefits, where the tax is collected through the monthly payroll. However, this requires advance planning. To payroll benefits, an employer must register with HMRC before the start of the tax year.

Part 3: Choosing Your Payroll System: From DIY to Done-For-You

The reality for most startups is that the founder or an operations lead manages finance, often using a combination of spreadsheets and accounting software. When it comes to UK payroll reporting, you have a few options, each with different trade-offs in terms of cost, time, and risk.

The DIY Approach

This typically involves using the payroll module within accounting software, such as Xero Payroll. For a UK e-commerce or professional services firm with a small team and no complex benefits, this can be a cost-effective solution. The software automates FPS submissions and can generate P60s. However, the responsibility for correct data entry, classifying benefits for P11Ds, and meeting every deadline falls entirely on you. The risk of error is high, particularly as complexity grows.

The Co-Sourced Approach

This involves engaging an accounting firm or a specialist payroll bureau to manage your payroll submissions and year-end reporting. You provide them with the monthly salary data, and they handle the compliance. This model significantly reduces the risk of late filing penalties and incorrect P11D calculations. For a growing SaaS or deeptech company starting to offer benefits like private medical insurance, this professional oversight is invaluable and protects you from miscalculating your Class 1A National Insurance liabilities.

The Fully Outsourced Approach

This includes services like a Professional Employer Organisation (PEO), where a third party becomes the employer of record. This is generally more suitable for larger, scaling companies or those expanding internationally, and is less common for pre-seed to Series B startups focused on the UK.

What founders find actually works is a phased approach. It often makes sense to start with a DIY system when the team is just a few people with simple salaries. You can then transition to a co-sourced model as soon as you introduce taxable benefits or the team grows beyond 5-10 employees, balancing cost with compliance risk.

Your UK Year-End Payroll Checklist

Navigating UK payroll compliance does not need to be a major drain on your resources. Success comes from establishing a clear process and respecting the key deadlines. The system is built on two core components: the monthly RTI cycle and the annual year-end reporting.

For your monthly rhythm, the single most important action is to send your Full Payment Submission (FPS) to HMRC on or before every payday. Automating this through software like Xero is standard, but the ultimate responsibility remains with the company.

For your annual wrap-up, focus on the three key dates after the 5 April tax year-end:

1. By 31 May: Ensure every employee receives their P60, summarising their pay and tax for the year.
2. By 6 July: File your P11D and P11D(b) forms with HMRC, reporting all taxable benefits, and provide copies to the relevant employees.
3. By 22 July: Pay the company’s Class 1A National Insurance bill on those benefits.

By treating payroll as a system of repeatable monthly tasks and a well-defined annual project, you can maintain HMRC payroll compliance and avoid the distraction of penalties. This allows you to focus your energy on growing your startup. For a wider view, see our Reporting Obligations guide.

Frequently Asked Questions

Q: What happens if I file a payroll report late to HMRC?
A: Filing your Full Payment Submission (FPS) late will trigger an automatic penalty from HMRC, which is £100 per month for companies with 1 to 9 employees. These penalties can accumulate quickly. Consistently late filing can also attract further scrutiny from HMRC, so maintaining a timely schedule is critical.

Q: Do I need to file a P11D if I do not provide any benefits?
A: If you have not provided any taxable benefits to employees or directors, you do not need to submit individual P11D forms. However, HMRC may still expect a 'nil return' via a P11D(b) form or online declaration to confirm that no benefits were provided and no Class 1A National Insurance is due.

Q: What is the difference between a P60 and a P45?
A: A P60 is an annual summary of an employee's total pay and tax deductions for a full tax year, issued to everyone still employed at the end of the tax year (5 April). A P45 is a leaver's document, issued only when an employee leaves, showing their pay and tax details up to their leaving date.

Q: How can I correct a mistake on a payroll submission I have already sent?
A: Mistakes on an FPS can usually be corrected on the next regular submission. For errors in a previous tax year, you may need to submit an Earlier Year Update (EYU) or an additional FPS. Using professional payroll software or a co-sourced provider helps minimise these errors and simplifies corrections when they occur.