HMRC Obligations explained

HMRC Employer Obligations: Registration, Reporting, and Compliance

If you are hiring in the UK, you cannot avoid HMRC. Her Majesty's Revenue and Customs is the UK's tax authority, and as an employer, you have a long list of obligations to meet. Miss a deadline, file the wrong figure, or fail to register on time, and the penalties add up fast.

But here is the thing most international companies do not realise: you do not need a UK entity to meet these obligations. An Employer of Record can handle the lot on your behalf.

Let us walk through exactly what HMRC expects from you as a UK employer, what the penalties look like when things go wrong, and how to stay on the right side of the rules.

What Are an Employer's Core Obligations to HMRC?

Every employer in the UK must register with HMRC for PAYE (Pay As You Earn) before their first payday. Once registered, you are responsible for deducting income tax and National Insurance contributions from your employees' pay, reporting those deductions to HMRC in real time, and paying what you owe on schedule.

Here is the full list of what HMRC requires:

• PAYE registration before the first payday
• Real Time Information (RTI) reporting every time you pay employees
• Employer National Insurance contributions calculated and paid correctly
• Student loan deductions where applicable
• Apprenticeship levy if your annual pay bill exceeds £3 million
• Annual reporting including P60s, P45s, and end-of-year declarations
• Record keeping for at least three years after the end of the tax year

Each of these comes with its own deadlines, its own reporting formats, and its own penalties for getting it wrong. It is a lot to manage, especially if you are also running a business in another country.

For a full breakdown of how PAYE works, including tax codes and deductions, see our guide on PAYE explained.

How Does PAYE Registration Work?

You must register as an employer with HMRC before your first payday. You can register up to two months before you plan to pay your first employee.

Registration is done online through the HMRC portal, and you will need:

• Your business's legal name and address
• Your Unique Taxpayer Reference (UTR) if you have one
• The date you plan to pay your first employee
• Details of the payroll scheme you are using

Once registered, HMRC issues you a PAYE reference number and an accounts office reference. You need these for all RTI submissions and payment transfers.

Timing matters. If you register late, HMRC can backdate your obligations. That means you owe tax and NI from the date you should have registered, plus interest and potential penalties. Do not wait until after your first payroll to sort this out.

If you are using an Employer of Record in the UK, they handle registration as the legal employer. You do not need a UTR, a PAYE reference, or any direct relationship with HMRC. The EOR's existing registrations cover your workers.

What Is RTI Reporting and Why Does It Matter?

Real Time Information (RTI) is the system HMRC uses to track employer payments in near-real time. Every time you pay your employees, you must submit an RTI report to HMRC.

There are two main types:

Full Payment Submission (FPS):

• Submitted on or before each payday
• Reports each employee's pay, deductions, and net pay
• Includes hours worked, tax code, NI category, and student loan deductions
• Must be filed every time you pay, even if you pay weekly

Employer Payment Summary (EPS):

• Submitted when you need to report something not included in an FPS
• Used for months where no payments were made
• Reports statutory payments (maternity, paternity, sick pay) to be recovered
• Claims Employment Allowance if applicable

The FPS is the big one. If you miss the deadline or file incorrect data, HMRC issues automatic penalties. And here is the critical detail: the FPS must be filed on or before payday. Not after. If you pay on the 28th, the FPS must be with HMRC by the 28th.

Late FPS filing penalties work on a sliding scale based on the number of employees. For a small employer with fewer than 10 employees, the penalty is £100 per month for each month the FPS is late. For larger employers, it scales up significantly.

Our guide on National Insurance in the UK explains how NI contributions are calculated and reported through RTI.

What Are Employer National Insurance Contributions?

Employer National Insurance contributions (NICs) are a payroll tax you pay on top of your employees' wages. As of the 2025/26 tax year:

• Secondary threshold: £5,000 per year (above this, you pay employer NI)
• Employer NI rate: 15% of earnings above the threshold
• Employment Allowance: Up to £10,500 off your employer NI bill (if eligible)

The Employment Allowance is available to most small employers, but there are exceptions. If you are a single-director company, you are not eligible. If your employer NI bill for the previous tax year was over £100,000, you are not eligible either.

Employer NI is calculated per pay period, not annually. So if someone earns £2,500 in a month, you calculate 15% on the amount above the monthly secondary threshold (£416.67). The calculation is done per employee, per pay period, and reported through the FPS.

Important change for 2025/26: The secondary threshold dropped from £9,100 to £5,000 from April 2025 (2025/26 onwards), meaning employers pay NI on a larger portion of each employee's earnings. This significantly increased employer costs and is a common source of budget shock for companies expanding into the UK.

What Annual Reporting Is Required?

Beyond the regular RTI submissions, HMRC requires several annual obligations:

P60 (End of Year Certificate):

• Must be issued to every employee still working for you on 5 April
• Shows total pay and deductions for the tax year
• Deadline: 31 May after the end of the tax year
• Can be issued electronically or on paper

P45 (Details of Employee Leaving):

• Must be issued when an employee leaves your employment
• Shows pay and deductions up to the date of leaving
• Must be provided to the employee on their last day or without unreasonable delay
• The employee needs this to give to their next employer

P11D (Expenses and Benefits):

• Reports any expenses or benefits provided to employees (company cars, medical insurance, etc.)
• Deadline: 6 July after the end of the tax year
• Class 1A employer NI is due on benefits by 22 July (19 July if paying by cheque)

Employer Payment Summary (EPS) for the year:

• End-of-year declaration confirming all FPS submissions are complete
• Must be filed by 19 April after the end of the tax year

Miss any of these deadlines, and you face automatic penalties. P11D penalties start at £300 per form plus £60 per day for continued failure. The P60 and P45 penalties are less severe but still avoidable.

What Are the Penalties for Non-Compliance?

HMRC's penalty regime is designed to be proportionate but painful. Here is what you are looking at:

Late FPS submission:

• £100 per month for 1 to 9 employees
• £200 per month for 10 to 49 employees
• £300 per month for 50 to 249 employees
• £400 per month for 250 or more employees

Late payment of PAYE and NI:

• Interest charged from the due date at the Bank of England base rate plus 4% (from 6 April 2025)
• Late payment penalties kick in after 30 days, 6 months, and 12 months

Incorrect returns:

• Careless errors: penalty of 0% to 30% of the tax underpaid
• Deliberate errors: penalty of 20% to 70%
• Deliberate and concealed errors: penalty of 30% to 100%

Failure to keep records:

• Up to £3,000 per tax year

Employer compliance checks:

• HMRC can visit your premises, request records, and interview staff
• If they find underpayments, you owe the tax plus interest and penalties
• They can go back up to 20 years for deliberate non-compliance

The record-keeping requirement is three years after the end of the tax year. So for the 2025/26 tax year (ending 5 April 2026), you must keep records until at least 5 April 2029.

What About the Employment Allowance?

The Employment Allowance reduces your employer NI bill by up to £10,500 per year. Not every employer qualifies, and you must claim it through your EPS.

Eligible employers:

• Most businesses, charities, and community amateur sports clubs
• Must have had an employer NI bill of £100,000 or less in the previous tax year
• Cannot be a single-director company

How to claim:

• Tick the Employment Allowance indicator on your EPS
• HMRC applies the allowance against your employer NI until it is used up
• If you do not use it all in one year, it does not roll over

This is a valuable relief for small employers, but it is easy to miss. If you are eligible and do not claim it, you are overpaying.

How Does an EOR Handle HMRC Obligations?

When you use an Employer of Record in the UK, the EOR becomes the legal employer. That means every HMRC obligation falls on the EOR, not on you.

Here is what that looks like in practice:

• PAYE registration: The EOR already holds a PAYE reference. Your workers are employed under that reference from day one.
• RTI reporting: The EOR's payroll team files the FPS and EPS on every pay cycle, on time, every time.
• Employer NI: The EOR calculates, deducts, and pays employer NI. The cost is included in your EOR fee.
• Annual reporting: The EOR issues P60s, P45s, and P11Ds. You do not need to know the deadlines because the EOR meets them all.
• Record keeping: The EOR maintains all payroll records for the required retention period.
• HMRC compliance checks: If HMRC queries anything, the EOR responds. They have the records, the expertise, and the direct relationship with HMRC.

This is particularly valuable for international companies because HMRC expects UK-specific knowledge. Tax codes, NI categories, statutory payment calculations, student loan thresholds, apprenticeship levy rules. Each of these has its own logic, and each changes regularly.

At Agility EOR, our UK payroll specialists handle the full HMRC lifecycle. You get compliant payroll without needing to become an expert in UK tax administration. Your only job is to approve the hours and pay the invoice.

For more on how workplace pension obligations interact with HMRC reporting, see our dedicated guide.