Correcting payroll errors in the United Kingdom
Reviewed by Mellow Editorial Team, HR & payroll content team
Payroll errors must be corrected as quickly as possible, and in most cases the fix goes through HMRC via your normal Real Time Information reporting — either in the next Full Payment Submission or through an Earlier Year Update if the mistake crosses a tax year boundary.
Why getting corrections right matters
An error left uncorrected does not simply sit quietly. It can mean employees pay the wrong amount of income tax or National Insurance, your employer NI liability (13.8% on earnings above the secondary threshold) is misstated, pension contributions calculated on incorrect qualifying earnings fall short of the 3% employer and 5% employee minimums, and HMRC may charge interest or penalties. Speed and accuracy both matter.
Correcting errors in the current tax year
If you spot a mistake before the tax year closes, the process is straightforward.
Wrong pay or deductions on a previous FPS
Submit your next Full Payment Submission with the correct year-to-date figures. RTI works on cumulative totals, so providing the right year-to-date numbers automatically accounts for the earlier error — you do not file a separate amendment. Make sure the correction appears on or before the next payday, in line with the RTI rule that an FPS must reach HMRC on or before the date employees are paid.
Overpayment to an employee
You need the employee's agreement before you recover the money through a deduction from future pay. Document that agreement in writing. You cannot simply take the money back without consent, as an unauthorised deduction from wages is unlawful under the Employment Rights Act. Recovery in instalments is often fairer and less disruptive.
Underpayment to an employee
Pay the shortfall in the next available payroll run and reflect it in that FPS. If the underpayment relates to National Minimum Wage, correct it immediately — HMRC can issue a notice of underpayment covering up to six years.
Incorrect tax code applied
If HMRC issued the wrong code and you applied it faithfully, the liability sits with HMRC to pursue from the employee directly in most cases. If you applied the wrong code through your own error, correct it in the next payroll run and resubmit with the right year-to-date figures.
Correcting errors after the tax year has closed
Once 5 April has passed, you cannot amend an FPS for the closed year. Instead, you use an Earlier Year Update (EYU) — or, from April 2020 onwards, a further FPS marked as relating to the earlier year, depending on your payroll software. Check what your software supports, as HMRC accepts both methods for certain tax years.
The EYU or amended FPS records only the difference between what you originally reported and what should have been reported. You will need the employee's final year-to-date figures from the original submission and the corrected figures to calculate the delta.
If you have already issued P60s (due by 31 May after each tax year ends) and the correction changes an employee's totals materially, issue a corrected P60 or a covering letter explaining the change. HMRC does not prescribe a specific replacement P60 format, but the employee will need accurate figures to complete any self-assessment return.
If the error affects benefits in kind, remember that P11Ds are due by 6 July following the tax year. An amended P11D can be submitted to correct figures, and any Class 1A NI liability is adjusted accordingly.
Telling employees and keeping records
Employees are entitled to understand why their pay or deductions have changed. A clear payslip note, or a brief written explanation, reduces confusion and maintains trust. Under the Employment Rights Act 2025, which has strengthened day-one rights across several areas, the expectation of transparent and accurate pay is higher than ever.
Keep records of the original error, what caused it, the correction made, and any employee communications. HMRC can inspect payroll records, and clear documentation demonstrates due diligence if questions arise later.
Penalties and how to reduce them
HMRC operates a penalty regime for inaccurate returns, but penalties are reduced where errors are disclosed promptly and voluntarily. An unprompted disclosure — one you make before HMRC opens an enquiry — attracts a lower penalty than one made after HMRC has already raised the issue. If you discover a systemic error affecting multiple employees or multiple pay periods, consider contacting HMRC's employer helpline to agree a correction plan before you file, particularly where the amounts involved are significant.
Keeping payroll software up to date, reconciling year-to-date totals against your general ledger each month, and reviewing FPS submissions before they are sent are the most reliable ways to catch mistakes before they need correcting at all.
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