UK Payroll Outsourcing

Trusted to provide UK & international payroll

Hand the whole PAYE run to people who do it every day.

Payroll outsourcing in the UK means a specialist calculates income tax and National Insurance, files Real Time Information (FPS/EPS) to HMRC on or before payday, administers pension auto-enrolment and statutory pay, and produces P60s, P45s and P11Ds — so you never carry the penalty risk. TopSource does all of it under your existing entity, or our UK Employer of Record employs your staff with no entity setup.

15 %

Employer National Insurance on earnings > £5000

£ 12,570

Tax-free Personal Allowance

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UK payroll at a glance

£ 12.71 /hr

National Living Wage (21 and over)

£ 12,570

Tax-free Personal Allowance

8 %

Minimum pension auto-enrolment (total)

45 %

Additional-rate income tax (top band)

Every Payslip Filed. Every Question Answered.

UK payroll demands precision. From PAYE income tax and National Insurance to Real Time Information filing, pension auto-enrolment and statutory pay, compliance is detailed and unforgiving. We handle every submission to HMRC so your people are paid right, on time, every time.

Income tax (PAYE) bands

UK income tax is collected at source through PAYE (Pay As You Earn). Employers withhold tax each pay run using the employee’s tax code and report it to HMRC in real time. The bands below apply to England, Wales and Northern Ireland (Scotland sets its own rates).

Personal Allowance taper: the £12,570 allowance is reduced by £1 for every £2 of income above £100,000, reaching £0 at £125,140 — creating an effective 60% marginal band in between.

Tax-free portion of annual income for most employees. Encoded in the standard tax code 1257L. Reduced for incomes over £100,000.

The 20% band covers the bulk of UK earners. Applied to income above the Personal Allowance up to the higher-rate threshold.

40% on income within this band. The threshold has been frozen, pulling more employees into higher-rate tax over time (fiscal drag).

Top rate of 45% on income above £125,140. There is no Personal Allowance at this level — it has fully tapered away.

Employment Cost Calculator

*Indicative figures only and not definitive legal advice. Local regulations change frequently. Consult an expert

United Kingdom

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Tax codes and how PAYE is applied

Every employee has a tax code that tells the employer how much tax-free pay to apply each period. HMRC issues and updates codes; the most common is 1257L, reflecting the standard £12,570 Personal Allowance.

1257L — standard code

The default code for an employee with one job and the full Personal Allowance. The number is the allowance ÷ 10; ‘L’ denotes the standard tax-free amount.

BR / D0 / D1 — flat-rate codes

BR taxes all pay at basic rate (20%), D0 at higher rate (40%), D1 at additional rate (45%). Common for second jobs or pensions.

W1 / M1 / X — emergency codes

Non-cumulative ’emergency’ codes used when prior pay/tax details are missing — each period is taxed in isolation until HMRC issues a full code.

K codes — negative allowance

Used when deductions (e.g. taxable benefits or owed tax) exceed allowances, adding to taxable pay rather than reducing it.

NT — no tax

Applied where no tax is to be deducted, for example certain non-resident or specific statutory situations.

Scottish (S) / Welsh (C) prefixes

An ‘S’ or ‘C’ prefix routes the employee to Scottish or Welsh income tax rates, which can differ from the rest of the UK.

National Insurance contributions (Class 1)

15 %

Employer secondary rate

8 %

Employee main rate (£242–£967/week)

2 %

Employee rate above £967/week

£ 242 /wk

Employee primary threshold (NI starts)

15 %

Class 1A / 1B on benefits in kind

£ 5,000 /yr

Employer secondary threshold

Pension auto-enrolment & National Minimum Wage

Two statutory obligations sit on top of pay: enrolling eligible staff into a workplace pension, and paying at least the National Minimum / Living Wage for the employee’s age band.

Auto-enrolment — 8% total

Eligible workers (aged 22 to State Pension age earning over £10,000) must be enrolled into a workplace pension. Minimum 8% of qualifying earnings: at least 3% from the employer, 5% from the employee.

National Living Wage — £12.71/hr

Statutory minimum for workers aged 21 and over from April 2026. Applies regardless of company size or sector.

Younger & apprentice rates

Lower bands apply: 18–20 at £10.85/hr, under 18 and apprentices at £8.00/hr from April 2026. Rates are reviewed every April.

Payroll reporting cycle and deadlines

UK payroll runs on Real Time Information (RTI): employers report pay and deductions to HMRC on or before every payday, not annually. The tax month runs from the 6th to the 5th, and the tax year from 6 April to 5 April.

Missing RTI deadlines triggers automatic HMRC penalties, so the submission calendar below is the backbone of a compliant UK payroll.

The core RTI return. Reports each employee’s pay, tax, National Insurance and deductions to HMRC on or before the day they are paid.

PAYE tax and NICs owed for the tax month are paid to HMRC by the 22nd if paying electronically (19th by post). Quarterly payment is possible for small employers under £1,500/month.

Filed when no employees were paid in a tax month, or to reclaim statutory payments and the Employment Allowance. Due by the 19th of the following tax month.

Annual summary of total pay, tax and NI given to every employee still employed at the end of the tax year (5 April). Must be issued by 31 May.

Reports taxable benefits in kind (company cars, private medical, etc.) and the Class 1A NIC due. Filed to HMRC and copies given to employees by 6 July.

Issued to an employee when they leave, showing pay and tax to date so their next employer applies the correct cumulative tax code.

Statutory pay and leave to budget for

Beyond gross salary, UK employers must fund a range of statutory payments and leave entitlements. Many can be partly reclaimed from HMRC via the EPS, but they all need to be calculated correctly each run.

£123.25 per week for up to 28 weeks, paid to eligible employees who are off sick. From April 2026 SSP is payable from the first qualifying day.

Up to 39 weeks: 90% of average weekly earnings for the first 6 weeks, then the lower of £194.32/week or 90% of AWE for the remaining 33 weeks.

Statutory Paternity, Adoption (SAP) and Shared Parental Pay (ShPP) are paid at the lower of £194.32/week or 90% of average weekly earnings.

Statutory minimum of 5.6 weeks’ paid holiday per year (28 days for a full-time worker, which may include the 8 UK bank holidays).

Average working week capped at 48 hours over a 17-week reference period under the Working Time Regulations; workers may individually opt out.

Employers with an annual pay bill over £3 million pay a 0.5% Apprenticeship Levy, collected through PAYE, offset by a £15,000 annual allowance.

Ready to simplify your UK payroll?

Talk to a TopSource expert about running fast, compliant PAYE payroll in the UK — RTI, pensions, statutory pay and HMRC reporting handled end to end.

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More than a payroll platform

The German labor market is governed by comprehensive payroll laws that emphasize employee rights and benefits. TopSource offers expert guidance and solutions for businesses managing their workforce in the UK. We assist with payroll processing, legal compliance, and human resource management, ensuring that businesses can focus on their core operations while maintaining a compliant and efficient workforce in the UK.

Simplified Payroll

Seamlessly run payroll in the UK and 130 other countries with guaranteed compliance to ever-changing local tax, labor, and reporting laws.

Dedicated Support

You’ll have a named account manager and access to local specialists for the United Kingdom, so every question, update or challenge gets a fast, informed response.

Access to Expertise

Employment law query? Best practice for benefits? Our expertise and support goes beyond Payroll to ensure you have the tools you need to grow your organization.

Sync with your HR Systems

Effortlessly sync payroll with time tracking, leave, onboarding, and benefits systems via our dedicated API. Easily setup by our hands-on onboarding team.

“Their expertise and understanding of the unique hiring, payment, and human resource practices in each country has been nothing short of outstanding. Our Client Success Manager, has done just that … ensured our success. Her availability and willingness to engage on a personal level has made all the difference.”

Director of Research Operations,

“Excellent service, especially from our account manager who has gone above and beyond to help us use the platform effectively. Our manager, significantly simplifies my workload. It is like having your own TopSource HR representative on your team.”

Chief Human Resources Officer,

“TopSource has been our go-to resource for international hiring. They are responsive, thorough, respectful and knowledgeable. The Client Success team has provided us with the utmost customer service, and the more we use TopSource, the more, it gives us access to more resources and knowledge.”

Senior Manager, Human Resources ,

Other services
 Accelerating your growth in the United Kingdom and beyond

TopSource goes far beyond payroll, acting as your end-to-end partner in global workforce management. From Employer of Record (EOR) services and seamless entity setup to localized accountancy and fractional HR support, we cover every aspect of international employment.

With our Global EOR services, you can hire talent in any country without establishing a legal entity. We handle employment contracts, payroll, benefits, and compliance on your behalf, enabling fast, risk-free global expansion.

On demand access to our fractional and regional HR professionals who understand local laws, cultures, and best practices. Bespoke talent intelligence including salary, business and talent market benchmarking.

Our global entity management team helps you establish and maintain your corporate entities worldwide. We ensure full compliance with local laws and regulations, streamline administrative processes, and minimize risk — so you can focus on growing your business.

We offer comprehensive accounting solutions tailored to meet your international needs. From bookkeeping and financial reporting to tax filings and audits, our services help you maintain transparency, accuracy, and compliance in every jurisdiction.

Meet our experts for the United Kingdom

Whether you’re entering the market or scaling operations, our specialists provide the insight and guidance you need to succeed in one of the world’s most dynamic and regulated employment landscapes. With TopSource, you’re backed by real experts, every step of the way.

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UK payroll: frequently asked questions

The questions our customers ask most often when setting up or switching their UK payroll. For anything specific to your business, our UK payroll specialists are a phone call away.

Payroll outsourcing in the UK means handing the full PAYE run to a specialist provider — calculating income tax and National Insurance, filing Real Time Information (FPS/EPS) with HMRC on or before payday, administering pension auto-enrolment, processing statutory pay (SSP, SMP, SPP) and producing P60s, P45s and P11Ds. A good provider acts as your interface to HMRC and The Pensions Regulator, so you avoid late-filing penalties and miscalculated deductions. TopSource runs UK payroll under your existing entity, or pairs it with our EOR service if you don’t have one.

Employers deduct income tax at source each pay run using the employee’s tax code. For 2026/27 the bands (England, Wales and NI) are: 0% up to the £12,570 Personal Allowance, 20% basic rate to £50,270, 40% higher rate to £125,140, and 45% above that. The Personal Allowance tapers away between £100,000 and £125,140. Scotland sets its own rates, signalled by an ‘S’ tax-code prefix.

Employers pay Class 1 secondary National Insurance on employees’ earnings above the secondary threshold, currently at a 15% rate. Class 1A and 1B NIC of 15% also applies to most taxable benefits in kind. Employers may be able to reduce their bill via the Employment Allowance, claimed through the EPS.

Real Time Information (RTI) requires employers to report pay and deductions to HMRC every payday, not once a year. The main return is the Full Payment Submission (FPS), filed on or before the day employees are paid. An Employer Payment Summary (EPS) is filed by the 19th of the following month to reclaim statutory payments or report a nil payment.

Auto-enrolment requires employers to put eligible staff (aged 22 to State Pension age earning over £10,000) into a workplace pension. The statutory minimum is 8% of qualifying earnings, of which at least 3% must come from the employer and 5% from the employee. The Pensions Regulator oversees compliance.

To register a PAYE scheme with HMRC and act as the legal employer you need a UK entity, a registered place of business, or a partner who already holds these. A Global Payroll provider like TopSource can run compliant payroll under your existing UK entity. If you don’t have one, pair it with our UK Employer of Record service to employ in the UK with no entity setup.

A P60 is the annual summary of an employee’s total pay, income tax and National Insurance for the tax year. Employers must give a P60 to every employee still employed on 5 April, by no later than 31 May following the end of the tax year.

The National Living Wage is the statutory minimum hourly pay for workers aged 21 and over, set at £12.71 from April 2026. Lower National Minimum Wage rates apply to younger workers and apprentices. Rates are reviewed every April, and paying below them is a criminal offence.

Book a demo of our UK Payroll with one of our experts

Trusted to provide UK & international payroll

Hand the whole PAYE run to people who do it every day.

UK payroll at a glance

Every Payslip Filed. Every Question Answered.