PAYE Error Corrections

Payroll mistakes are more common than most employers realise. Whether you run a small business or manage payroll for multiple employees, even a small PAYE error can create a big headache — for you, your staff, and HMRC. The good news is that PAYE errors can be corrected, and the process doesn’t need to be complicated once you understand how it works. Our Tax Expert simplifies PAYE errors, offers solutions for fixing them, and provides tips to prevent future mistakes. It’s designed for business owners, payroll managers, and accountants seeking practical advice for compliance and reputation protection.

Understanding PAYE Errors

The PAYE (Pay As You Earn) system is how employers collect and pay Income Tax and National Insurance Contributions (NICs) from employees’ wages to HMRC. It’s designed to run smoothly through Real Time Information (RTI) reporting, but mistakes can happen at any stage.

Common PAYE errors include:

• Entering the wrong pay or deduction amounts.
• Using the wrong tax code for an employee.
• Reporting an incorrect payment date or tax month.
• Forgetting to send a submission or sending it late.
• Paying the wrong amount to HMRC (either too much or too little).

Even small errors can cause problems such as:

• Employees are being over- or underpaid.
• Incorrect tax calculations.
• HMRC penalties for late or inaccurate reporting.
• Payroll records not matching what HMRC holds.

When these mistakes happen, correcting them quickly and accurately is crucial to avoid further complications.

Correcting Errors in the Current Tax Year

If you spot a mistake during the same tax year (before 5 April), the process is relatively straightforward.

How to Fix PAYE Errors in the Same Year

You can correct most errors by updating the figures in your next payroll submission. Payroll software automatically sends updated “year-to-date” information to HMRC, which replaces the incorrect data.

If you need to fix the error urgently, you can send a corrected submission before the next payroll run. Just make sure the payment date and pay frequency match your original submission.

For example:

• If you accidentally paid an employee £100 less last month, you can add the missing amount to the next payslip and send the corrected year-to-date figures to HMRC.
• If you deducted the wrong amount of National Insurance, adjust the next payslip to correct it.

Tips for Making Corrections Smoothly

• Act quickly. The sooner you correct the error, the easier it is to fix.
• Keep good records. Always document what went wrong, what you corrected, and when.
• Use your payroll software. Most modern payroll systems include correction options that automatically update HMRC with the right data.

By keeping on top of these details, you show HMRC that you are taking reasonable care to run your payroll correctly — which helps protect you from penalties.

Correcting PAYE Errors from Previous Tax Years

Sometimes mistakes are discovered long after a tax year has ended. Fixing these requires a slightly different approach, as HMRC’s systems “close off” old tax years once the new one begins.

How to Fix Previous Year PAYE Errors

For recent tax years, you can send a correction through your payroll software, just as you would for the current year. The submission updates the year-to-date totals for that specific year.

However, for older tax years, your software might not allow direct corrections. In that case, you may need to contact HMRC and explain the situation. They’ll tell you how to report the change — sometimes this involves sending an “Earlier Year Update” (EYU) or writing to them with the corrected figures.

What to Keep in Mind

• You might owe HMRC money. If the error means you underpaid PAYE or NIC, you’ll need to pay the difference.
• You might be due a refund. If you overpaid, you can usually reclaim it, though HMRC may ask for supporting evidence.
• Older corrections take time. HMRC may take several weeks to process updates to previous years, so plan accordingly.

Fixing Mistakes in Payments to HMRC

Sometimes, the error isn’t in your payroll data but in how much you paid HMRC. This could happen if your PAYE bill were calculated incorrectly or if you made a duplicate payment.

• If You Paid Too Little: If you discover that you paid less than you should have, don’t panic. You can correct this by adding the missing amount to your next payment to HMRC. Make sure your next submission reflects the correct totals so the payment matches the records.
• If You Paid Too Much: If you’ve overpaid, contact HMRC to explain the situation. They may offset the overpayment against your next bill or issue a refund. Always keep written records of your communication and payment details.
• Reconciling Your PAYE Account: To stay on top of things, regularly check that your payroll software and HMRC’s PAYE account match. This helps you catch discrepancies early, before they become bigger issues.

Avoiding PAYE Errors in the future

Fixing errors is one thing — preventing them is even better. With a few simple processes in place, you can dramatically reduce the risk of payroll mistakes.

• Keep Payroll Software Up to Date: Ensure your payroll software is updated each tax year. Updates often include changes to tax codes, NIC thresholds, and submission formats.
• Double-Check Employee Details: Always confirm employee start dates, pay rates, and tax codes before running payroll. Incorrect data is one of the most common causes of PAYE errors.
• Run Regular Reconciliations: Compare your payroll records with HMRC’s PAYE account regularly — ideally every month or quarter. This helps catch any mismatches early.
• Train Your Payroll Team: Payroll rules change frequently. Investing in staff training or outsourcing payroll to a specialist accountant can save time, money, and stress in the long run.
• Communicate with Employees: When a correction affects an employee’s pay or deductions, inform them clearly and promptly. Transparency builds trust and avoids confusion.
• Keep a Clear Audit Trail: Maintain records of all payroll runs, corrections, and correspondence with HMRC for at least three years. This can protect your business in the event of an audit.

What Happens If You Don’t Correct PAYE Errors

Ignoring PAYE errors can have serious consequences. HMRC expects employers to take “reasonable care” when operating PAYE. Failure to correct mistakes can result in:

• Penalties for inaccurate reporting or late submissions.
• Interest charges on underpaid tax or NIC.
• Compliance checks from HMRC.
• Damage to staff trust if wages are repeatedly incorrect.

By acting quickly and keeping accurate records, you can demonstrate that any errors were genuine mistakes and that you took proper steps to fix them.

How Tax Accountant Can Help

For many business owners, PAYE can be confusing — especially if you’re managing multiple employees or have a mix of full-time, part-time, and seasonal staff. A qualified tax accountant can:

• Identify and correct PAYE errors efficiently.
• Communicate with HMRC on your behalf.
• Reconcile your payroll records and payments.
• Ensure your payroll system is compliant with the latest tax rules.
• Provide ongoing support to prevent future mistakes.

Working with our PAYE tax expert not only saves time but also reduces your risk of costly errors and penalties.

PAYE error corrections are a normal part of running payroll — even the most careful employers can make mistakes. What matters is how quickly and accurately you fix them.