PAYE penalties and HMRC letters: what to do

Understanding Your PAYE Payment Deadlines

As an employer, you are responsible for deducting Income Tax and National Insurance Contributions (NICs) from your employees' wages and paying these to HM Revenue & Customs (HMRC). These payments, along with any student loan deductions and Construction Industry Scheme (CIS) deductions, form your total PAYE liability.

The tax year runs from 6 April to 5 April the following year. Your PAYE payments are typically due monthly or, for smaller employers, quarterly.

Monthly and Quarterly Payment Deadlines (2026/27)

• Electronic Payments: If you pay electronically (e.g., Faster Payments, Bacs, CHAPS), your payment must clear into HMRC's account by the 22nd of the month following the end of the tax month. For example, PAYE for the tax month 6 April to 5 May is due by 22 May.
• Non-Electronic Payments: If you pay by cheque through the post, the deadline is the 19th of the month. However, HMRC strongly discourages this method.
• Quarterly Payments: If your average monthly PAYE and NICs bill is typically less than £1,500, you may be able to pay quarterly. The deadlines for 2026/27 are:
• Quarter 1 (6 April – 5 July): Due 22 July 2026
• Quarter 2 (6 July – 5 October): Due 22 October 2026
• Quarter 3 (6 October – 5 January): Due 22 January 2027
• Quarter 4 (6 January – 5 April): Due 22 April 2027

Real Time Information (RTI) Submissions

In addition to payments, you must submit information to HMRC under Real Time Information (RTI):

• Full Payment Submission (FPS): This must be sent to HMRC on or before the day you pay your employees.
• Employer Payment Summary (EPS): If you need to reclaim statutory payments (like Statutory Sick Pay or Maternity Pay) or report that you haven't paid any employees in a tax month, you must send an EPS by the 19th of the following tax month.

Why You Might Receive an HMRC Letter About PAYE

Receiving a letter from HMRC can be concerning, but it's important to understand why it might have been sent. Common reasons for PAYE-related letters include:

• Late Payment: You missed a payment deadline or paid less than the full amount due.
• Discrepancies: HMRC's records don't match your submissions. This could be due to errors in your Full Payment Submissions (FPS) or Employer Payment Summaries (EPS).
• Estimated Payments: If you haven't submitted an FPS or EPS, HMRC might estimate what they think you owe.
• Outstanding Debt: The letter could be a reminder about a long-standing PAYE debt.

The "P30" document you might refer to is a historical term. Before Real Time Information (RTI) was introduced in April 2013, the P30 was a monthly form used to record and pay PAYE and National Insurance. While the physical form no longer exists, your payroll software will generate a similar monthly summary of your PAYE liabilities, often still referred to as P30-equivalent data.

Responding to HMRC Letters About PAYE

It's vital not to ignore any correspondence from HMRC. Ignoring letters can lead to escalating penalties and enforcement action.

1. Verify the Letter's Authenticity: Scam letters and emails are common. If you have any doubts, do not use contact details on the letter. Instead, find HMRC's official contact numbers on gov.uk and call them directly to confirm the letter is genuine. Be wary of letters demanding immediate payment or asking for bank details.
2. Review Your Records: Check your payroll records, bank statements, and HMRC online account to see if the amount HMRC states is due matches your figures. Look for any missed payments, incorrect submissions, or processing errors.
3. Contact HMRC or Your Accountant:

• If you agree with the amount and can pay, do so promptly to minimise further penalties and interest.
• If you believe there's a mistake, contact HMRC to explain. They can often help resolve discrepancies.
• If you cannot pay the full amount immediately, contact HMRC as soon as possible to discuss a "Time to Pay" arrangement. This allows you to pay your tax in instalments over an agreed period. HMRC is generally more helpful if you engage with them early.
• Your accountant can help you understand the letter, reconcile your records, communicate with HMRC on your behalf, and negotiate payment plans.

PAYE Penalties and Interest

HMRC applies penalties and charges interest on overdue PAYE amounts.

Late Payment Penalties

The first time you pay PAYE late in a tax year, you won't receive a financial penalty, but it will be recorded as a default. Subsequent late payments within the same tax year will incur penalties:

• 1 to 3 late payments: 1% of the unpaid amount.
• 4 to 6 late payments: 2% of the unpaid amount.
• 7 to 9 late payments: 3% of the unpaid amount.
• 10 or more late payments: 4% of the unpaid amount.

Additionally, if a monthly or quarterly payment remains unpaid:

• An extra 5% penalty is charged if it's still unpaid after 6 months.
• A further 5% penalty is charged if it's still unpaid after 12 months. These additional penalties apply even if only one payment in the tax year was late.

Late Payment Interest

HMRC charges interest on any overdue PAYE from the day after the payment due date until the debt is settled. The late payment interest rate is currently 7.75% per year (from 9 January 2026, figures for illustration — check current rates). This interest accrues daily, making prompt payment crucial to avoid increasing costs.

Common mistakes

• Ignoring HMRC letters: This is the biggest mistake. HMRC will escalate their actions, leading to higher penalties and potential enforcement.
• Assuming an HMRC letter is a scam without checking: While scams exist, genuine letters must be addressed. Always verify using official gov.uk contact details.
• Not reconciling your payroll records regularly: Discrepancies between your records and HMRC's can lead to unexpected debt letters.
• Delaying contact if you can't pay: HMRC is more likely to be flexible with a "Time to Pay" arrangement if you contact them proactively.