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Posted: Tue 8th Apr 2025
6 min read
Running payroll can be one of the more stressful admin tasks for small business owners – especially if you're managing it yourself.
With HMRC rules, tax codes and ever-changing thresholds, it's all too easy to make a mistake. But a few simple checks and good habits can help you stay on top of it and avoid costly slip-ups.
Here's how to steer clear of the most common payroll errors in 2025/2026.
Some new employers don't realise they need to register for PAYE (Pay As You Earn) until it's too late – and they're facing a fine.
If you're paying any employee £96 or more a week, you must register as an employer with HMRC and operate a PAYE system. You may need to deduct tax or National Insurance contributions (NICs) even if the employee's yearly income is below the personal allowance.
Keep in mind: if your team earns below this threshold and you're not offering benefits like joining a pension scheme, you may not need to register – but it's worth double-checking.
One of the most frequent mistakes? Leaving a new worker on the wrong tax code, which means they either overpay or underpay tax. Not ideal for employee morale – or for your compliance record.
For the 2025/2026 tax year, the standard tax code is 1257L, which covers the personal allowance of £12,570.
If you're not sure which code to use for your tax deductions:
wait for HMRC to send a P6 notice, or
use the emergency tax code (1257L W1/M1) temporarily
Make sure you're also collecting a starter checklist (which replaced the old P46 form) from every new employee.
HMRC expects real-time information (RTI) submissions on or before every payday. If you miss these deadlines, you could run into legal issues and/or face an automatic penalty.
Set reminders or use payroll software that automates submissions. And always double-check your submission has gone through – don't assume.
National Insurance (NI) can get complicated fast, especially with recent changes. Here's what you need to know for 2025/2026:
Employee (primary) NI threshold: £242 per week
Employer (secondary) NI threshold: £96/week (previously £175 per week)
Employer NI rate: 15% on earnings above that £96 threshold
So, if you're paying someone even just over £96 per week, employer NICs kick in.
If your total bill for employer NIC deductions is under £100,000 a year, you could reduce your bill by up to £10,500 thanks to the Employment Allowance – now increased for 2025/2026.
Many small businesses miss this entirely. Claim it via your payroll software or through HMRC's online service.
Download your free toolkit for a payslip template and give your employees the clear and consistent financial information they deserve.
Whether it's sick pay, maternity leave or the new Neonatal Care Pay, statutory payments come with their own set of rules. Here are some key 2025/2026 rates:
Statutory Sick Pay (SSP): £118.75 per week
Statutory Maternity/Paternity/Adoption Pay (SMP/SPP/SAP): £187.18 or 90% of average weekly earnings (whichever is lower)
Statutory Neonatal Care Pay: Introduced April 2025; same rate as SMP/SPP
You can usually reclaim some or all of this from HMRC, but you need to report it correctly.
HMRC expects you to keep detailed payroll records for at least three years. This includes:
payments and deductions (such as tax and student loan deductions)
employee records
tax code notices
pension contributions
Most payroll software handles this for you, but it's still your responsibility to make sure it's accurate.
Rules change – often quietly. Employer NIC rates, thresholds and allowances are all different this year compared to 2024/2025.
The easiest way to stay informed is to:
subscribe to HMRC's employer email bulletins
follow trusted payroll blogs or software providers on social media
set a yearly date in your diary to review your payroll system in April
If your payroll process is taking up too much of your time, consider:
switching to payroll/accounting software (like QuickBooks, Xero or Sage)
outsourcing to a bookkeeper or an accountant
getting free advice from your local Growth Hub or an Enterprise Nation adviser
It's not just about avoiding mistakes – it's about freeing up your time to run your business.
