Late payroll submissions are a costly mistake for UK businesses. Since 2020, HMRC has issued over £75 million in penalties for payroll reporting infringements.
These fines can harm your business’s finances and reputation. This article explains the causes, solutions, and preventative measures to fix late payroll submissions and their associated HMRC late payroll penalties.
The cost of late payroll submissions
Late payroll submissions result in significant financial penalties. Here’s a breakdown of fines based on the number of employees:
| Number of Employees | Monthly Penalty |
| 1 – 9 | £100 |
| 10 – 49 | £200 |
| 50 – 249 | £300 |
| 250+ | £400 |
If the delay exceeds three months, an additional fine of 5% of unpaid tax* and National Insurance contributions is applied.
From April 2022 to April 2023 alone, more than £20 million in fines were issued by HMRC for late payroll submissions. These penalties could have been and avoid payroll compliance issues.
Why do late payroll submissions happen?
Understanding the root causes of late payroll reporting is key to fixing them. Common reasons include:
- Mistakes in data entry or miscalculations delay payroll processing.
- Outdated or unreliable payroll software can cause disruptions.
- Businesses often overlook submission dates due to poor planning.
- Staff unfamiliar with HMRC rules may struggle with compliance.
The Impact of late payroll submissions
Late submissions don’t just result to avoid payroll fines / resolve late payroll fines, they also affect your business and employees:
- Financial Losses: Paying penalties reduces funds available for growth or operations.
- Employee Dissatisfaction: Delayed salaries can lead to employee turnover.
- Studies show that nearly half of employees consider leaving their jobs after repeated payroll errors.
- Reputational Damage: Non-compliance can harm your business’s credibility with clients and stakeholders.
How to fix late payroll submissions
If you’ve missed a payroll deadline, take these steps immediately:
1. Submit Your FPS Without Delay
File your Full Payment Submission (FPS) as soon as possible, even if it’s late. This minimises further penalties.
2. Provide a Valid Reason for Delay
When submitting late, explain the cause to HMRC. Valid reasons may include technical failures or unforeseen circumstances.
3. Contact HMRC Directly
If you believe the delay was unavoidable, reach out to HMRC to discuss your case. In some instances, they may waive penalties.
How to prevent late payroll submissions
Preventing delays / correcting payroll errors is essential for avoiding fines and maintaining smooth operations. Here are some strategies:
1. Use Automated Payroll Software
Invest in reliable tools that automate calculations and submissions. According to MHR Global, automation can reduce time spent on payroll by up to 60%.
2. Create a Compliance Calendar
Set reminders for key deadlines, such as PAYE and National Insurance submissions. A well-organised schedule ensures nothing is missed.
3. Train Your Payroll Team Regularly
Ensure staff are updated on the latest HMRC regulations and best practices for compliance.
4. Conduct Periodic Audits
Review your payroll processes regularly to identify inefficiencies or risks before they escalate.
5. Plan for Emergencies
Have contingency plans in place for unexpected issues like software failures or staff absences.
Businesses using automated payroll systems report up to a 60% reduction in time spent on payroll processing.
Nearly half of employees would consider leaving their job after repeated payroll errors, highlighting the importance of timely payments.
FAQs
What happens if I miss a payroll submission deadline?
Payroll compliance with HMRC generate fines based on the size of your workforce, starting at £100 per month for small businesses and increasing with company size.
Are there exceptions to HMRC filing deadlines?
Yes, HMRC may waive penalties if you provide a valid reason for the delay or if it’s your first infringement within the tax year.
How can I ensure my payroll system is compliant?
Use automated software, train staff regularly, and conduct periodic audits to ensure compliance with HMRC rules.
What are the long-term benefits of timely submissions?
Timely submissions avoid fines, improve employee satisfaction, and enhance your business’s reputation with stakeholders.
Conclusion
Penalties for late payroll submissions are entirely avoidable with proper planning and technology adoption. The financial impact, over £75 million in fines since 2020, is a stark reminder of the cost of non-compliance.
By automating processes, training staff, and staying organised, businesses can not only avoid penalties but also improve overall efficiency and employee satisfaction.
Taking proactive steps today will save money tomorrow while ensuring smooth operations and compliance with HMRC regulations.
Parul is a dedicated writer and expert in the accounting industry, known for her insightful and well researched content. Her writing covers a wide range of topics, including tax regulations, financial reporting standards, and best practices for compliance. She is committed to producing content that not only informs but also empowers readers to make informed decisions.