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Employers are required to retain records for all employees, outlining the gross amounts of pay and all deductions. PAYE records have to be kept for a specified period of time. They must also be accurate, so HMRC will be able to check that the correct amount of income tax and National Insurance is being deducted from the pay of employees.

Reasons to keep PAYE records

Accurate records have to be kept by employers in order to remain compliant with HMRC regulations. It is also easier for HMRC to check that your employees have paid the correct amount of tax and National Insurance at the end of the year. HMRC will likewise check that you are paying the right amount of statutory pay to employees, in keeping with the National Minimum Wage. The information you record will be used by you to make accurate payment submissions to HMRC as part of the Real Time Information system. If you fail to maintain accurate and timely records, HMRC could charge a penalty for failure to take reasonable care.

What has to be included in PAYE records

An employee’s payroll record must hold their personal information, which includes their name, address, date of birth and National Insurance number. The gross pay, net pay and deductions from the amount, including income tax, National Insurance and any student loan deductions must be recorded. Details of National Insurance – including a breakdown of the various amounts paid at each earnings level – should also be included. Additionally, records also need to be kept for any expenses or employee benefits.

There are many other details that need to be kept by the employer, such as absences for annual leave or sickness and pension payments. Details of all submissions which have been sent to HMRC also have to be recorded and retained by you, including Full Payment Submissions, Earlier Year Updates, and Employer Payment Summary.

Additional records to keep

In addition to the above, there are other records that have to be retained as part of PAYE. These include the rates of pay, hours worked by each employee, any accidents which occur, and pensions data.

Failure to maintain PAYE records

You must keep accurate PAYE records for the current year and the last three years. Failure to do so will incur a penalty that could be up to £3,000. Penalties may also be charged for failure to make the correct payments of tax and National Insurance under PAYE to HMRC.


For advice on how to get started with PAYE see our guide, here.

About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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