What is PAYE?
Pay As You Earn (PAYE) is HMRC's system for collecting Income Tax and National Insurance contributions from employees' wages before they are paid. As an employer you are responsible for calculating, deducting and paying these amounts to HMRC on behalf of your staff.
Any business with at least one employee must register as an employer with HMRC and operate PAYE.
National Insurance contributions
National Insurance is paid by both employees and employers:
- Employee NICs — deducted from gross pay before the employee receives their net salary
- Employer NICs — an additional cost to the business, paid on top of the employee's gross salary
- Class 1A NICs — paid annually on benefits in kind such as company cars and private medical insurance
Rates and thresholds are updated each April, so payroll software has to be kept current — one reason most small employers run PAYE through dedicated payroll software rather than by hand.
Real Time Information (RTI)
Real Time Information is HMRC's payroll reporting system. You must submit a Full Payment Submission (FPS) to HMRC every time you pay an employee — on or before payment date. Each FPS includes:
- 1Employee pay details and tax codes
- 2Year-to-date earnings and deductions
- 3National Insurance contributions for each employee
If you have a period with no payments, you send an Employer Payment Summary (EPS) instead.
Key payroll deadlines
| Deadline | What to do |
|---|---|
| On or before pay day | Submit Full Payment Submission (FPS) to HMRC |
| 19th of following month | Pay PAYE and NICs by cheque |
| 22nd of following month | Pay PAYE and NICs electronically |
| 6 July | Submit P11D forms for benefits in kind |
| 31 May | Issue P60s to all employees |
Missing an FPS triggers a late-filing penalty, so the submission has to happen on pay day itself — not when you next reconcile.
Auto-enrolment pension duties
If you employ at least one person, you must automatically enrol eligible employees into a workplace pension. Eligible workers are aged 22 to State Pension age and earn above £10,000 per year.
Minimum employer contribution is currently 3% of qualifying earnings; employees contribute at least 5% including tax relief.
How Finovo fits into UK payroll
Finovo does not run the pay calculation or file RTI itself. UK payroll works through a BrightPay sync: BrightPay handles the pay run, the gross-to-net calculation and the FPS submission to HMRC, and Finovo takes it from there:
- 1Payslips and payroll journals flow back into your ledger automatically
- 2Staff costs land in your P&L without re-keying
- 3Pension and NI postings stay linked to the pay run that produced them
The result is that payroll and bookkeeping stay reconciled without a monthly export-and-import ritual — you keep a specialist payroll tool for the filing, and your books stay current.
French and German payroll integrations are on the roadmap; today Finovo covers French and German payroll accounting rather than running local pay runs. See our cross-border accounting guide for what one workspace does cover across all three countries, and start a free trial to connect your books.