Employer Payroll UK 2026/27 — PAYE, NI & Employment Allowance
Employer payroll UK 2026/27 guide — PAYE registration, RTI submissions, NI thresholds, Employment Allowance, and the deadlines that catch small employers.
Running payroll as a small employer in 2026/27 is more expensive than it was eighteen months ago. The employer NI rate sits at 15%, the secondary threshold has fallen to £5,000, and the Employment Allowance still caps at £5,000. The rules around RTI, P11Ds, and director payroll have not changed shape — but the numbers behind them have. This guide walks through employer payroll UK 2026/27 obligations end-to-end, with a Manchester director-shareholder slant where it matters.
If you employ anyone — including yourself as a paid director — you almost certainly need a PAYE scheme. Skipping registration is the single biggest mistake we see when new clients move across from a DIY setup.
When you must register a PAYE scheme
HMRC requires a PAYE scheme as soon as any one of these triggers is met:
- You pay an employee at or above the Lower Earnings Limit (£6,396 a year for 2026/27).
- An employee has another job or claims a pension.
- An employee receives expenses or benefits in kind.
- You pay a director — even one pound of salary triggers registration.
A new limited company that pays its sole director £5,000 a year still needs PAYE. The figure sits below the personal allowance and produces no Income Tax, but HMRC wants the RTI submissions on file.
Registration takes a few minutes online but HMRC can take up to five working days to issue the employer reference and accounts office reference. Start at least a week before your first planned payday. You can register through the HMRC PAYE registration page.
When a PAYE scheme is not required
If every employee earns below the Lower Earnings Limit, has no second job, gets no benefits, and is not a director, you can run a simple payroll without a PAYE scheme. This is rare in practice — most one-person companies meet at least one trigger.
PAYE 2026 thresholds and rates at a glance
The 2026/27 numbers reflect the rates effective from 6 April 2026. Always cross-check with gov.uk before running a payroll cycle, as Autumn Budget changes occasionally land late.
| Item | 2026/27 figure | Notes |
|---|---|---|
| Personal allowance | £12,570 | Frozen — default tax code 1257L |
| NI primary threshold (employee) | £12,570 | Aligned with personal allowance |
| NI secondary threshold (employer) | £5,000 | Lowered from £9,100 in April 2025 |
| Upper Earnings Limit (UEL) | £50,270 | Employee NI drops to 2% above this |
| Employee NI — main rate | 8% | Between £12,570 and £50,270 |
| Employee NI — upper rate | 2% | Above £50,270 |
| Employer NI rate | 15% | On all earnings above £5,000 |
| Employment Allowance | £5,000 | Annual cap — claim via EPS |
| Apprenticeship Levy | 0.5% | Pay bills above £3m allowance only |
| Lower Earnings Limit (LEL) | £6,396 | PAYE registration trigger |
The big change to absorb: the employer NI rate is now 15% (up from 13.8%) and the secondary threshold has dropped to £5,000 (from £9,100). A director on a £12,570 salary now triggers employer NI on the £7,570 slice above £5,000 — about £1,136 per year — where in 2024/25 there was no employer NI at all. The Employment Allowance, when available, wipes this out.
You can read the official rate detail on the gov.uk National Insurance rates page.
RTI submission — FPS, EPS, and the on-or-before rule
Real Time Information (RTI) is how HMRC tracks PAYE. Two submissions matter:
Full Payment Submission (FPS) — sent on or before every payday, listing each employee's gross pay, tax, NI, and student loan deductions. Late FPS submissions trigger penalties from £100 to £400 per month depending on headcount.
Employer Payment Summary (EPS) — sent by the 19th of the tax month following the period it relates to. You file an EPS when:
- Claiming the Employment Allowance (one EPS per tax year flags the claim).
- Recovering statutory maternity, paternity, adoption, or shared parental pay.
- You had no payments to report in the period (a "nil EPS").
- Reclaiming Construction Industry Scheme deductions (limited companies only).
Most payroll software handles both submissions automatically once it is configured. The error we see most often is a director who runs payroll once a year in March, files all twelve FPS submissions at once, and gets twelve months of late-filing penalties. RTI does not work retrospectively — each payday must have its FPS sent on or before that day.
The single-director-only rule excludes many one-person limited companies from Employment Allowance. If your company's only employee on the payroll is also the only director, you cannot claim the £5,000 allowance. The fix is usually to add a paid spouse or family member as a second employee earning above the secondary threshold — but the role must be genuine work, not a paper appointment.
Employment Allowance UK rules for 2026/27
The Employment Allowance lets eligible employers reduce their employer NI bill by up to £5,000 per tax year. It is claimed by ticking a box in payroll software or filing a flagged EPS at the start of the tax year.
Eligibility narrowed in 2020 and again in 2024. To claim in 2026/27, your business must:
- Have employer Class 1 NIC liability for the year.
- Not be a public body or carry out more than 50% public sector work.
- Not be a single-director limited company with no other paid employees above the secondary threshold.
The £100,000 prior-year NIC cap that used to exclude larger employers was scrapped from 6 April 2024, so the allowance is now open to most growing SMEs that were previously locked out.
For a typical Manchester small employer running a four-person payroll, the £5,000 allowance covers the first £33,333 of employer NI at 15%. Most small employers exhaust their employer NI bill long before the cap matters. Check the live rules on gov.uk Employment Allowance.
When you cannot claim Employment Allowance
The biggest gotcha is the single-director rule. If you set up a limited company alone and pay only yourself, you cannot claim. Adding a second director with no pay does not fix it. Adding a paid spouse who genuinely works in the business — bookkeeping, admin, marketing — does fix it, provided they earn above the secondary threshold and the work is documented.
Director payroll UK — optimal salary in 2026/27
For owner-managers, the salary versus dividend decision now turns on whether Employment Allowance is available.
If Employment Allowance is available (multi-employee company):
Set the director salary at £12,570 (personal allowance). Employer NI on the slice from £5,000 to £12,570 is £1,136, fully absorbed by the £5,000 allowance. The full salary is corporation tax deductible at 19% or 26.5% depending on profit band. This is usually the most tax-efficient split.
If Employment Allowance is NOT available (single-director-only company):
The maths gets tighter. Some directors set salary at the £5,000 secondary threshold to avoid all employer NI, then top up with dividends. Others still run £12,570 and accept the £1,136 employer NI cost because the corporation tax deduction on the extra salary outweighs it in the marginal relief band.
For the full salary versus dividend mix — including the 2026 dividend rate rise to 10.75% / 35.75% — see our limited company dividend tax 2026/27 guide.
Tax codes, P60s, P45s, and P11Ds
The default tax code for 2026/27 is 1257L — unchanged because the personal allowance is frozen at £12,570. HMRC issues changed codes mid-year for changes in benefits, side income, or marriage allowance transfers. Always use the code on the latest P9 or P6 notice, not the one your software remembers from last year.
Year-end and benefit forms employers must file:
- P60 — give to every employee still on the payroll at 5 April, by 31 May.
- P45 — issue immediately when an employee leaves.
- P11D — file by 6 July for any employee or director who received taxable benefits or expenses in the tax year (company cars, private medical, interest-free loans above £10,000).
- P11D(b) — Class 1A NIC return, also due 6 July.
- Class 1A NIC payment — pay by 22 July (electronic) on the value of benefits reported in P11D(b). Charged at the employer NI rate of 15%.
Payrolled benefits — where benefits are taxed through PAYE in real time rather than reported on P11D — are increasingly the default. From April 2027, HMRC plans to make payrolling benefits mandatory for most employers. Setting it up now is sensible.
PAYE and NIC payment deadlines
Once payroll is run and RTI is filed, HMRC expects the cash. Monthly PAYE and NIC payments are due by:
- 22nd of the following tax month for electronic payment (Faster Payments, Direct Debit, bank transfer).
- 19th of the following tax month for cheque (rarely used now).
Tax months run 6th to 5th. So PAYE on payslips dated 6 May to 5 June must be paid by 22 June.
Small employers who expect average monthly PAYE/NIC of £1,500 or less can apply to pay quarterly instead of monthly. Quarterly payment dates are 22 July, 22 October, 22 January, and 22 April.
Late payment penalties start at 1% of the unpaid amount and rise to 4% for repeated lateness within a tax year. HMRC also charges interest at the official rate (currently around 7.75% — verify on the gov.uk interest rates page).
Apprenticeship Levy reach
The Apprenticeship Levy is 0.5% of an employer's annual pay bill above a £3 million allowance. Practically, this means employers with annual wage bills below £3 million pay nothing. Most small Manchester businesses, contractors, and director-led limited companies are well clear of it.
If your group of connected companies has a combined pay bill near £3 million, talk to your accountant about how the allowance is shared.
RTI common errors that cost small employers money
Five mistakes we keep seeing in the first three months of running a new client's payroll:
- Forgetting the Employment Allowance EPS at the start of the tax year. The claim must be flagged in a fresh EPS each April. Last year's claim does not roll over automatically in some payroll packages.
- Filing FPS after payday. Even one day late triggers the late-filing rules. Set payroll to submit automatically on the morning of the pay run.
- Wrong NI category letter for a director. Directors use category letter A in most cases but use an annual earnings period for NI calculations, not monthly. Setting a director to monthly NI in your software under-deducts and triggers a year-end adjustment.
- Missing the P11D deadline. The 6 July deadline catches employers who forget about company-paid private health insurance or interest-free director loans above £10,000.
- Not updating tax codes from HMRC notices. Software does not always pull P6 / P9 notices automatically — check the PAYE online portal monthly.
Frequently asked questions
When do I need to register a PAYE scheme as a UK employer?
Register for PAYE before the first payday if you pay any employee above the Lower Earnings Limit, employ someone with another job, pay a director, or provide expenses and benefits. HMRC can take up to five working days to issue the reference, so register at least a week before the first payroll run.
What is the employer NI threshold for 2026/27?
The employer (secondary) NI threshold is £5,000 per year — lowered from £9,100 on 6 April 2025. Employer NI is charged at 15% on every pound of salary above this threshold. Always check gov.uk for the live figure before running payroll.
Who can claim the £5,000 Employment Allowance in 2026/27?
Most UK employers with secondary Class 1 NIC liability can claim the £5,000 Employment Allowance against their employer NI bill. The single-director-only rule excludes companies where the sole employee on the payroll is also the only director — you need at least one other paid employee earning above the secondary threshold.
When do I have to submit RTI returns to HMRC?
Submit a Full Payment Submission (FPS) on or before each payday. File an Employer Payment Summary (EPS) by the 19th of the following tax month if you are claiming Employment Allowance, recovering statutory pay, or had no payments to report.
What is the optimal director salary for 2026/27?
Most director-shareholders take a salary equal to the personal allowance (£12,570) when Employment Allowance is available to absorb the employer NI, or set it at the £5,000 secondary threshold when it is not. The right answer depends on corporation tax rate and other income — read our limited company dividend guide for the full salary versus dividend maths.
What happens if I file RTI late?
HMRC charges a monthly penalty from £100 to £400 based on employer size for late FPS submissions. The first late filing in a tax year is usually unpenalised. Late PAYE payment also attracts interest plus a percentage penalty that rises with repeat offences.
This article is general guidance, not personal tax advice. Speak to a qualified accountant before acting on it.