PAYE & RTI Explained: How UK Directors Must Report Payroll to HMRC

PAYE & RTI in Plain English

Every employer in the UK — whether running a limited company with staff or paying themselves as a director — must operate PAYE and comply with Real Time Information (RTI). These systems are designed to ensure that Income Tax, National Insurance, and other deductions are collected on time.

For directors, the rules can feel unnecessarily rigid, especially with HMRC’s “on or before” submission requirement. Yet failure to follow them precisely can now result in fines, interest charges, and unwelcome HMRC scrutiny.

This article explains PAYE and RTI in clear terms, highlights the key reporting deadlines, and shows why accuracy is essential for every employer.

How PAYE Works for Directors & Employees

• Employees: PAYE deducts Income Tax, National Insurance, student loans, and pension contributions directly from wages before payment.

• Directors: PAYE applies too, but with special rules. Director NIC can be calculated on an annual basis (spreading liability across the tax year) or an alternative basis (like employees, switching to annual at year-end).

Directors who misunderstand this often end up underpaying or overpaying NIC — creating compliance risks and cashflow headaches.

RTI Reporting Rules (“On or Before”)

HMRC requires employers to submit payroll data on or before payday using RTI:

• Full Payment Submission (FPS) – Sent every time staff (or directors) are paid, showing gross pay and deductions.

• Employer Payment Summary (EPS) – Used to report adjustments, such as statutory pay claims or Employment Allowance.

Missing even one RTI deadline can result in penalties — even if PAYE/NIC is paid on time.

Key Payment Deadlines for PAYE & NIC

• Monthly PAYE/NIC: By the 22nd of the following month (if paid electronically).

• Quarterly option: Smaller employers with liabilities under £1,500 per month can pay quarterly.

• Year-end obligations:

  • P60 to employees by 31 May.

  • P11D & P11D(b) for benefits by 6 July.

  • Class 1A NIC on benefits by 22 July (if paid electronically).

Updated Penalties & Interest Rules

HMRC now applies both late filing penalties (for missing RTI submissions) and late payment penalties (for PAYE/NIC paid late):

• Late filing penalties (RTI not filed on time):

  • 1–9 employees: £100 per month.

  • 10–49 employees: £200 per month.

  • 50–249 employees: £300 per month.

  • 250+ employees: £400 per month.

• Late payment penalties (PAYE/NIC not paid on time):

  • 1st late payment in a tax year → no penalty (unless more than 6 months late).

  • 2–4 defaults → 1% of the late amount.

  • 5–7 defaults → 2%.

  • 8–10 defaults → 3%.

  • 11+ defaults → 4%.

• Additional charges:

  • 5% penalty if more than 30 days late.

  • Further 5% penalties at 6 months and 12 months.

  • Interest accrues daily on all late payments.

👉 Full HMRC guidance: What happens if you don’t pay PAYE and NIC on time.

Why Accurate RTI Matters

HMRC uses RTI submissions to:

• Match PAYE/NIC payments with payroll records.

• Keep employee tax records up to date.

• Monitor compliance and identify risks.

Errors or delays can trigger:

• Late filing penalties starting from £100 per month.

• Penalties for late payments and daily accruing interest.

• Risk of HMRC compliance checks or audits.

How Wexley & Associates Helps

Directors don’t need to juggle PAYE deadlines, RTI submissions, and penalty risks alone. At Wexley & Associates, we:

• Run PAYE accurately for directors and employees.

• Manage RTI submissions so they’re always filed on time.

• Optimise director pay structures for tax efficiency.

• Provide peace of mind by keeping clients fully HMRC-compliant.

Keep PAYE Simple, Stay HMRC-Compliant

Don’t risk HMRC fines or stress over payroll mistakes. With expert support, PAYE and RTI can be managed seamlessly while you focus on running your business.

👉 Contact Wexley & Associates today to simplify your payroll and safeguard compliance.

References

• HMRC: PAYE and payroll for employers

• HMRC: Reporting payroll information to HMRC

• HMRC: What happens if you don’t pay PAYE and National Insurance on time

• Related Wex Insider article: Payroll & Employers — The UK Director’s Compliance Guide