Payroll and RTI made simple: UK employer essentials, deadlines and auto-enrolment checks

Getting payroll right matters. Pay your team accurately, report to HMRC on time, and you avoid needless penalties and stress. If you are new to PAYE or growing fast, the jargon can feel like a second job. This guide strips it back so you can run payroll confidently, file Real Time Information correctly, and meet auto-enrolment duties without surprises.

 

We cover how RTI works, when to send Full Payment Submissions and Employer Payment Summaries, what changes if you pay early, and how to handle starters and leavers. You will also find a plain guide to auto-enrolment eligibility, postponement, common exclusions, and the typical costs to budget.

 

And if you decide you would rather not wear the payroll hat, MBSC can run RTI payroll for you and keep you compliant, with friendly ongoing advice.

Set up basics: PAYE, pay dates and records

Before your first payday, register as an employer for PAYE and set a consistent pay frequency, for example monthly or weekly. Keep accurate employee records, including right to work, tax code notices, starter details, written statements of employment particulars, and any student loan or postgraduate loan flags. Choose software that can file RTI and produce itemised payslips.

 

Good habits help later. Fix a clear payroll cut-off, reconcile gross to net pay, and review any benefit in kind or attachment orders before finalising each run.

What RTI is and how it works

Real Time Information is HMRC’s digital reporting for PAYE. Instead of a single annual return, you send pay and deduction data each time you pay employees. This keeps HMRC’s records current so tax codes and liabilities update through the year.

 

An RTI cycle usually includes:

 

• Full Payment Submission (FPS): sent on or before each payday, with pay, tax, National Insurance contributions, student loan deductions, pension deductions, and year-to-date figures.
• Employer Payment Summary (EPS): sent when adjustments are needed, such as claiming Employment Allowance, recovering statutory payments, or reporting no payments in a tax month.

 

Most small employers only need the FPS every pay run. Use the EPS when there is an adjustment or when you did not pay anyone in a tax month.

Deadlines: FPS on or before payday, EPS by the 19th

You must submit the FPS on or before the date employees are paid. If you pay on the 25th, file the FPS no later than the 25th. If your payday falls at the weekend or a bank holiday, submit on or before the day you actually pay. EPS filings are due by the 19th of the following tax month to affect that month’s PAYE account.

 

If you pay earlier than planned, file earlier. HMRC treats early pay as the actual payday, which can also shift tax-period allocation in month 12 or around year end, so plan ahead at Christmas and in March or April.

Starters, leavers and common changes

For a new starter, collect their P45 or use the starter checklist in your software to set the right tax code and student loan plan. Include the starter flag on the first FPS you send for them. For a leaver, process the leaving date in the payroll, issue the P45, and mark the final FPS for that employee accordingly.

 

Update payroll promptly for:

 

• Statutory payments such as SSP, SMP, SPP, ShPP, SAP, and parental bereavements
• Student loan and postgraduate loan notices
• Tax code changes, court orders, and pension changes
• Benefits in kind if you payroll them

Early payments, late filings and penalties

If you bring payday forward, send the FPS before funds land. Late FPS filings can attract automatic penalties, typically based on the number of employees. HMRC can also charge interest on late PAYE and National Insurance. Avoid the most common errors by locking your pay date policy, running validation checks in software, and reconciling to your PAYE account monthly.

Auto-enrolment essentials

You must assess workers each pay period for auto-enrolment. In broad terms, eligible jobholders are aged 22 to State Pension age, ordinarily working in the UK, and earning at or above the annual earnings trigger. You must automatically enrol eligible jobholders and make employer contributions.

 

You can postpone assessment and enrolment for up to three months from a trigger date, for example a new starter’s first day or the date they first cross the earnings threshold. You must issue a postponement notice and still assess at the end of postponement.

 

Excluded groups typically include the genuinely self-employed, company directors without contracts of employment when there is no other staff, and workers under 16 or over 74. Non-eligible jobholders and entitled workers are not auto-enrolled but may have opt-in or join rights, and different contribution rules can apply.

 

Budget for contributions, pension provider fees, and the admin time or software costs to assess earnings, send statutory letters, manage opt-outs and refunds, and keep records for at least six years.

Software choices: HMRC Basic PAYE Tools vs cloud payroll

HMRC’s free Basic PAYE Tools can handle very simple PAYE, calculate liabilities, and submit RTI. It is limited for multi-employee setups, pensions integration, and automation.

 

Cloud payroll software typically offers:

 

• Integrated RTI filing and payslips
• Auto-enrolment assessments, letters, and pension data files
• Leave tracking, journal posting to accounting software, and employee self-service

 

Most growing employers outgrow Basic PAYE Tools quickly. If you only pay one or two directors with straightforward pay, the free tool can be enough. For regular staff and pensions, cloud software usually saves time and reduces mistakes.

When to outsource payroll

Outsource if payroll accuracy, RTI timing, or pension admin is causing stress, or when you need cover for holidays and sickness. Outsourced support can also help if you pay bonuses or overtime, have frequent starters and leavers, or face irregular pay dates. MBSC provides a practical payroll management service that includes RTI payroll filing, guidance when pay dates change, and ongoing advice so you can focus on running the business.

 

If you want local, joined-up help across bookkeeping, VAT and payroll, our team supports clients across Surrey. You can learn more about our payroll services or speak to us if you need a reliable partner for compliance.

Typical costs to plan for

Beyond gross pay, plan for:

 

• Employer National Insurance contributions where applicable
• Employer pension contributions and provider fees
• Payroll software subscriptions or outsourced payroll fees
• Statutory payments and holiday pay accruals
• Apprenticeship Levy if your pay bill reaches the threshold

 

Costs vary with headcount, pay levels, and software choice, so review this regularly as you grow.

Quick FAQ

• What is Real Time Information for HMRC payroll? RTI is the system that requires you to send pay and deduction data to HMRC every time you pay employees, mainly through the FPS and, when needed, the EPS.
• When should RTI be submitted? Send the FPS on or before each payday. Send any EPS by the 19th of the following tax month for it to apply promptly.
• What is included in an RTI submission? The FPS includes gross pay, tax, National Insurance, pensions, student loans, and year-to-date totals, plus starter or leaver markers. The EPS includes adjustments and claims such as Employment Allowance or statutory payment recovery.
• How often should payroll information be sent to HMRC under RTI? Every pay run, aligned to your pay frequency, with an FPS on or before payday.
• How soon do I have to auto-enrol a new employee? Assess them from the start. If eligible, enrol them immediately or use postponement for up to three months with the correct notice.
• What are the auto-enrolment rules in brief? Assess each pay period, enrol eligible jobholders, contribute at least the minimum rates, issue required communications, manage opt-ins and opt-outs, and keep records.
• Who is excluded from auto-enrolment? Typically the self-employed, directors without employment contracts when there are no other staff, and workers under 16 or over 74. Others may not be automatically enrolled but can have opt-in or join rights.
• Does HMRC have free payroll software? Yes, HMRC provides Basic PAYE Tools for simple setups. Many employers prefer cloud software for automation and pensions.
• Do I need an accountant to run payroll? Not legally, but many small businesses use an accountant to reduce errors, stay compliant, and save time.

A simple next step

Payroll does not have to be a headache. If you want a friendly, Chartered Certified team to run RTI payroll, manage auto-enrolment, and keep you on track, MBSC is here to help. Explore our payroll services to see how we work, or book a free 15 minute chat and get practical advice tailored to your business.

 

Helpful reads for local businesses in Surrey:

 

• If you want an ongoing partner for PAYE and RTI, see our payroll services.
• For joined-up bookkeeping support that keeps payroll smooth, explore our bookkeeping services.
• If you prefer a local adviser who understands Surrey businesses, learn more about our accountants in Surrey.

 

Getting VAT right is one of those milestones that can feel bigger than it is. The rules look dense, there are several schemes, and the timing can affect prices, margins, and cash in the bank. With a bit of structure you can make a clear decision and avoid surprises.

 

This guide walks through when you must register, when voluntary registration can help, how to choose a VAT scheme, and the cashflow effects. We also cover sector notes for construction and service businesses, what evidence you need, how to register online, and common mistakes to avoid.

 

If you want a second pair of eyes, MBSC provides VAT registration advice, VAT returns preparation, and ongoing bookkeeping so you can stay compliant without spending your evenings on admin.

When you must register for VAT

You must register if your VAT-taxable turnover exceeds the HMRC threshold in any rolling 12-month period or if you expect to go over it in the next 30 days alone. VAT-taxable turnover means income from sales that would be subject to VAT if you were registered, including zero-rated items, but excluding VAT-exempt income.

 

Typical triggers:

 

• A strong month of new orders that pushes your 12-month total above the threshold
• Winning a contract that will exceed the limit within 30 days
• Moving from mainly exempt to taxable work

 

When in doubt, monitor turnover monthly using bookkeeping software with a VAT threshold watchlist and set calendar reminders. MBSC’s bookkeeping support includes threshold tracking and early warnings so you can register on time.

Voluntary registration, pros and cons

If you are under the threshold, you can register voluntarily. It often suits B2B businesses that buy and sell to VAT-registered customers.

 

Potential benefits:

 

• Reclaim input VAT on costs and capital items
• A VAT number can signal scale and credibility with some clients
• Smoother supply-chain relationships where VAT invoices are expected

 

Potential downsides:

 

• You must charge VAT on sales where your customers cannot reclaim it, which can make your price feel higher
• Extra admin, record keeping, and MTD for VAT digital filing
• Cashflow pinch if you invoice on long terms but pay suppliers upfront under the Standard scheme

 

Voluntary registration is usually more attractive for B2B service providers than for B2C sellers where end customers are price sensitive. Run a margin and price test before you decide.

Choosing a VAT scheme

HMRC offers several schemes. The right fit depends on your margins, who you sell to, and how your cash moves.

 

• Standard VAT accounting: You charge VAT on sales and reclaim VAT on purchases. VAT is calculated on invoice dates, not payment dates. This is flexible and accurate, but it can strain cashflow if customers pay slowly.

 

• Cash Accounting Scheme: You account for VAT when you are paid and when you pay suppliers. This can improve cashflow for businesses with slow-paying customers. There are entry and exit turnover limits, and some transactions are excluded. Records must clearly show payment dates.

 

• Flat Rate Scheme (FRS): You charge customers the normal VAT rate, but pay HMRC a fixed percentage of your gross VAT-inclusive turnover based on your industry category. You usually do not reclaim input VAT except on certain capital assets. FRS can simplify admin and sometimes save money if you have low costs. Margins matter here, so do a worked example before joining.

 

• Annual Accounting Scheme: You submit one VAT return per year with advance payments by instalments, then a final balancing payment. This smooths admin and helps budgeting but can obscure quarter-by-quarter cash movements unless bookkeeping is tight. You can combine this with Cash Accounting in some cases.

 

How to choose: model three scenarios using your last 4 quarters of sales and purchases. Compare:

 

• Total VAT due under Standard versus FRS
• Cash timing under Standard versus Cash Accounting
• Admin time and the risk of errors given your invoicing pattern

 

MBSC can run these comparisons and recommend a scheme that fits your invoices, margins, and software.

Sector notes: construction and service businesses

Construction: The Domestic Reverse Charge (DRC) for construction services often applies where both parties are VAT-registered and the work falls within the Construction Industry Scheme. You do not charge VAT to your VAT-registered contractor customer. Instead, they account for both output and input VAT. Your invoice must state that DRC applies and show the VAT rate that would have applied. Materials are generally included under DRC unless the customer is an end user or intermediary supplier, in which case standard VAT rules may apply. Getting this wrong can lead to penalties, so keep clear evidence of status and contracts.

 

Service businesses: B2B services often fit well with voluntary registration because most clients reclaim VAT. B2C services need careful pricing. Consider price points, whether to quote VAT-inclusive prices, and whether your market can absorb the change.

What VAT means for cashflow and pricing

VAT affects cashflow through timing. Under Standard accounting, you can owe VAT on invoices you have raised but not yet been paid for. Under Cash Accounting you align VAT to receipts and payments, which can help when customers pay on 30 to 60 day terms.

 

On pricing, decide whether your advertised price is VAT-inclusive or plus VAT. For B2C, customers usually focus on the total they pay, so VAT-inclusive pricing avoids sticker shock. For B2B, plus VAT is common and understood. Either way, update quotes, proposals, terms, and your website so there is no confusion.

 

Good digital records are essential. HMRC’s Making Tax Digital rules require digital record-keeping and e-filing via compatible software. If you need help choosing or setting up tools, our bookkeeping and VAT support makes the process smoother.

Evidence and documents you need for VAT registration

Have the following to hand:

 

• Legal name, trading name, and addresses
• National Insurance number and personal ID for sole traders and partners
• Company number and incorporation date for limited companies
• Business bank details
• Description of activities, projected turnover, and the date you want to register from
• Any previous VAT registrations if applicable
• Records of pre-registration purchases and assets, as you may be able to reclaim VAT on qualifying items bought before registration

 

Keep invoices and receipts organised. Digital copies are acceptable if they are clear and complete.

How to register online

You register via your Government Gateway account. Create or sign in to your business tax account, add VAT, and follow the prompts. HMRC will ask for your business details, turnover estimates, the date you want to become liable, and your preferred scheme. After approval, HMRC issues a VAT number and confirms your VAT period and filing deadlines. You must start charging VAT from your effective date of registration and include the correct wording on invoices.

 

If you need help with the application or want scheme advice before you submit, our VAT registration service can handle the process, set up your software, and prepare your first return.

Common mistakes to avoid

• Missing the rolling 12-month threshold by only watching the tax year
• Picking Flat Rate without checking the industry percentage and your cost base
• Forgetting DRC rules on construction invoices
• Charging VAT before your VAT number is issued without marking invoices correctly for later reissue
• Using non-compliant invoice layouts that miss required details
• Mixing business and personal spending, which inflates admin and errors
• Filing late or paying late due to missing bank reconciliation or unposted supplier bills

 

Consistent bookkeeping reduces nearly all of these risks. A mid-year records health check is a simple win.

FAQ

When do I need to register for VAT?
Register when your VAT-taxable turnover exceeds the HMRC threshold in a rolling 12 months, or if you expect to exceed it in the next 30 days.

 

Is it worth a small business being VAT registered?
Often yes for B2B firms that can reclaim input VAT and whose customers can reclaim VAT. For B2C, weigh the price impact carefully.

 

Can I run a business without being VAT registered?
Yes, if you are under the threshold and your work is not required to be registered for other reasons. You cannot charge VAT in that case.

 

How do I check if a company has VAT registration?
Ask for their VAT invoice or VAT number and check it using HMRC’s VAT number checker service.

 

How much does it cost to register for VAT in the UK?
HMRC does not charge a fee to register. Software, bookkeeping, and professional support costs can vary.

 

What documents do I need for VAT?
ID and business details, company number if incorporated, bank details, activity description, turnover estimates, and evidence of pre-registration costs you may reclaim.

 

Do I need an accountant to do my VAT return?
No, but many owners choose to use an accountant to avoid errors, select the right scheme, and stay compliant with MTD rules.

How MBSC can help

MBSC is a Chartered Certified accountancy practice supporting small businesses across Surrey and the UK with VAT registration, VAT return services, and ongoing bookkeeping. We give clear scheme advice, set up MTD-compliant software, prepare returns, and keep your records tidy so filings are timely and accurate. If you would value local support, you can learn more about our bookkeeping and VAT services, or speak to a dedicated accountant for a free 15-minute chat.

 

Helpful reads for Surrey business owners:

 

• Explore practical support in our VAT return services page for compliant filing and submission help.
• If you want ongoing records support, see our bookkeeping services for setup, tidy-ups, and quarterly reviews.
• For local, approachable advice across accounts and tax, browse our home page for accountants Surrey coverage and services.

Summary and next step

Register for VAT when your taxable turnover passes the threshold or earlier if voluntary registration suits your customers and margins. Choose a scheme by modelling cash timing and total VAT, and keep sector rules like DRC front of mind. Good records and the right software make VAT manageable. If you want a sounding board before you register or need help with returns, get in touch for a short no-obligation consultation and we will guide you through the decision and the setup.

 

The current tax year ends on 5th April 2026 — and there are just a few weeks left. Once that date passes, many tax-saving opportunities are gone for good. Here are five things you should do right now.

1. Use Your Personal Allowance

The personal allowance for 2025/26 is £12,570. If you haven’t earned this amount yet — or if a spouse or partner hasn’t — it may be worth looking at how income is structured before 5th April. Unused personal allowance cannot be carried forward.

2. Pay Yourself the Right Dividend (Limited Company Directors)

If you run a limited company, the dividend allowance is £500 for 2025/26. If your company has profits available, review whether you’ve drawn the most tax-efficient amount before the year ends. Taking too much or too little could cost you.

3. Make a Pension Contribution

Pension contributions are one of the most powerful ways to reduce your tax bill. You can contribute up to £60,000 per year and get full tax relief. Contributions made before 5th April count for this tax year. Limited companies can also make employer pension contributions directly — saving corporation tax too.

4. Check Your Annual Investment Allowance

If you’re thinking of buying equipment, vehicles, or machinery for your business — do it before 5th April to get the tax relief this year. The Annual Investment Allowance is £1 million, meaning most small businesses can write off 100% of qualifying asset purchases against profit.

5. Review Your Business Structure

Are you still a sole trader? Now is a good time to review whether operating as a limited company could save you money. In many cases, incorporating can save thousands per year through a combination of salary and dividends.

Need Help Before 5th April?

At MBSC Accountancy & Consultancy Ltd, we offer tax planning consultations to help you make the most of the remaining weeks. We serve small businesses and self-employed individuals across Surrey and the UK.

 

 Making Tax Digital Income Tax April 2026

Making Tax Digital for Income Tax starts April 2026 for sole traders and landlords earning over £50,000. Find out what you need to do now — and how MBSC can help.

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If you’re a sole trader or landlord earning over £50,000 a year, Making Tax Digital for Income Tax (MTD for ITSA) is coming — and it starts in just weeks, from 6th April 2026.

This is one of the biggest changes to the UK tax system in years, and many business owners are still not ready. Here’s exactly what it means and what you need to do right now.

What Is Making Tax Digital for Income Tax?

Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) is HMRC’s programme to move tax reporting fully digital. Instead of filing one Self Assessment return per year, you will need to keep digital records of all income and expenses, submit quarterly updates to HMRC through approved software, file an End of Period Statement at the end of the tax year, and submit a final declaration replacing your current Self Assessment return. That means five submissions per year instead of one.

Who Is Affected From April 2026?

The April 2026 deadline applies to sole traders and landlords with gross income over £50,000 from self-employment or property — or a combination of both. From April 2027, the threshold drops to £30,000, bringing in many more businesses.

What Software Do You Need?

You must use HMRC-recognised software. Popular options include QuickBooks, Xero, FreeAgent, and Sage. Spreadsheets on their own will not be accepted unless you use compatible bridging software.

What Do You Need to Do Right Now?

Check if you’re affected by looking at your 2024/25 income figures. Choose your software and set it up before April. Start keeping digital records from 6th April 2026 at the latest. And speak to your accountant — we can help you choose the right software and set everything up.

How MBSC Can Help

At MBSC Accountancy & Consultancy Ltd, we are helping all our clients get MTD-ready before April. We can advise on the right software for your business, help you set it up, and manage your quarterly submissions on your behalf. Don’t leave it until the last minute

In a significant move outlined in the Autumn Budget 2024, the UK government has announced that Value Added Tax (VAT) will now apply to private education fees. This decision has stirred considerable debate, especially among private schools and parents. Here’s a breakdown of the key points to help you understand the implications of this change.

What Does This Mean for Private Education Fees?
Starting from the budget announcement, VAT will be levied on private education fees, which were previously exempt from the tax. This means that parents will now have to pay VAT on tuition fees for their children attending private schools. The government’s reasoning behind this change is to align the taxation system more consistently and ensure a fairer distribution of VAT across different sectors.

When Does VAT Apply?
One crucial aspect of the new rules is the timing of VAT application. The VAT will apply based on the taxable supply of services rather than at the point of payment. This means that even if parents make advance payments towards tuition fees, these will not be exempt from VAT. The application of VAT is tied to when the service (education) is actually provided, not when the payment is made.

For example, if a parent pays upfront for a year’s worth of tuition, VAT will apply to that payment when the educational services are delivered throughout the year, not when the payment is made in advance.

Input VAT on Past Purchases
Private schools who registered for VAT after purchasing assets or services can claim back VAT on their past purchases under certain conditions.

Assets: Schools that bought assets prior to VAT registration can claim input VAT for up to six years. This could include items like buildings, equipment, or other long-term investments that were purchased before they were VAT-registered.

Services: For services, schools can claim input VAT for up to six months before the VAT registration date. This applies to services directly related to the school’s operation, such as utilities or maintenance services.

What Does This Mean for Schools and Parents?
For private schools, the decision to apply VAT could significantly alter their financial planning. Schools will need to adjust their pricing structure to account for VAT on fees and ensure that they comply with the new regulations. Additionally, private schools may find some relief in being able to claim input VAT on previous purchases.

Parents, on the other hand, will face higher education costs as VAT is added to their tuition fees. Schools will likely pass this cost onto parents, making private education a more expensive option. However, it’s important to note that the specific details on how VAT will be added to fees are still being worked out, and schools may vary in how they apply this charge.

Looking Ahead
The decision to apply VAT to private education is a significant policy shift that will affect both private schools and the families who send their children to them. While private schools will have some relief through the ability to claim VAT on past purchases, parents should brace for higher tuition costs. It will be essential for both schools and parents to stay informed on the detailed implementation of these rules to fully understand their impact.

As the Autumn Budget 2024 continues to unfold, more guidance will likely be issued to clarify how VAT will be applied, and how private education providers can manage the changes effectively. Stay tuned for updates!

Some of my clients who are subcontractors have sent their invoice. They charged VAT on materials but not on the services because these are covered by the domestic reverse charge (DRC).
Is the VAT charge on materials correct ?

Materials are Generally Subject to the DRC: When a supply of construction services is subject to the DRC, the VAT is not charged by the supplier. Instead, the customer accounts for both input and output VAT on their VAT return.
1.Supplies to End Users: If the customer receiving the construction service is the end user (i.e., they do not intend to sell or supply the service onward), then the DRC does not apply. Instead, regular VAT rules apply, meaning the supplier charges VAT on the full value of the work, including materials.
2. Intermediary Suppliers: If the customer is an intermediary, not supplying the construction services directly but passing them to another party, they are also outside the scope of the DRC. VAT is charged in the usual way.
In summary, under the CIS, materials are excluded from deduction calculations, while under the DRC, materials are generally included unless the customer is an end user or intermediary supplier.

HMRC is reminding employers who are planning to pay their workers early over the Christmas period. If you pay any of your employees before their normal payday, you must report the payment on your full payment submission (FPS) as if it were made on the employee’s normal (contractual) date.

Paying employees early doesn’t change the date on which the deductions from pay must be sent to HMRC. Payment of PAYE tax and NI contributions for salaries paid between 6 December 2024 and 5 January 2025 is 17 January 2025 (normally the remittance date is 19th of the month, but this falls on a Sunday this time ), or 22 January if paid electronically.

Depends on;
What does the payment cover?
If The cover is to compensate for the revenue loss, then the answer is ‘YES’,the payment is taxable for income tax.
If it is to replace an asset, capital gain rules apply.
The compensation payment for an asset is taxable as a capital gain. However, if the unused compensation amount is relatively small you can opt to defer the gain until the building is sold. This might not always be the most tax-efficient option in a future year, so it could be more tax efficient not to defer.

Since 14 October 2024 HMRC will only accept claims for job expenses made by post on a Form P87 accompanied by evidence, e.g. a receipt for the purchase. There are exceptions for flat rate expenses .
If you’re intending to make a claim, use HMRC’s eligibility checker first . It doesn’t guarantee that you’re entitled to tax relief; its main purpose is to tell you which claim method to use.
Working from home
A claim for working from home expenses, either the £6 per week allowed by concession or actual costs, will only be eligible where the employee can submit a relevant clause in their employment contract proving an obligation to work at home.
HMRC now requires evidence showing the amount, date and the reason why the expense was necessary. For example, this can include receipts for purchases or mileage logs for business journeys. Plus, you must provide details of any part of the expense reimbursed to you by your employer