What Happens If Payroll Is Submitted Late?

Missing a payroll deadline, even by a day or two, can create bigger problems than you might expect. Whether it’s a late Full Payment Submission to HMRC or wages that didn’t land in an employee’s account on time, the consequences can be more serious than many employers realise.

So, what happens if payroll is submitted late? It depends on what was late and why, but in most cases, HMRC penalties, employee disputes, and interest charges are all on the table.

This guide covers what HMRC will do, how employees are protected, and what steps to take if it happens to you.

Why Payroll Deadlines Matter

Running payroll in the UK involves two separate legal obligations, and missing either one can cause problems.

The first is paying your employees. Under the Employment Rights Act 1996, employers must pay wages on the agreed pay date set out in the employment contract. That is a legal duty.

The second is reporting to HMRC. Under Real Time Information (RTI), employers must submit a Full Payment Submission (FPS) on or before each pay date. If no employees are being paid in a given tax month, an Employer Payment Summary (EPS) should be sent instead.

Both carry separate penalties if missed, and HMRC treats them differently. Knowing which is which matters before anything goes wrong.

What Happens to Employers If Payroll Is Submitted Late to HMRC?

Late Full Payment Submission (FPS) Penalties

Your FPS must be submitted to HMRC on or before the date you pay your employees. File it late, and HMRC can issue a penalty.

There are a few situations where HMRC will not charge one:

• Your FPS is late, but all payments reported are within three days of the employee’s pay date. This is the three-day easement. Employers who rely on it regularly may still be contacted or penalised.
• It is the first time in the tax year you have filed late. HMRC typically lets the first one go.
• You are a new employer and have sent your first FPS within 30 days of paying an employee for the first time.

From the second late submission onwards in the same tax year, monthly penalties apply. The amount depends on how many employees you have:

If you operate more than one PAYE scheme, penalties can be charged on each one separately.

HMRC Specified Charges

If you fail to submit an FPS or EPS at all, HMRC does not simply wait. They can raise a specified charge, which is often an estimated bill based on your previous filing and payment history. 

A specified charge doesn’t replace the need to file. You will still need to file the outstanding FPS or EPS to replace the estimated charge with the actual amount owed. Sending updated year-to-date figures in your next FPS will not clear it. You need to submit the missing return for the month in question. 

You can view any specified charges by logging into your PAYE account online.

Late PAYE Payment Penalties

Filing late and paying late are different things, and HMRC treats them differently. You can submit your FPS on time and still face penalties if you do not pay what you owe.

The penalty is based on how many times you have paid late in the same tax year:

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

If the debt remains unpaid after six months, HMRC adds a further 5%. After 12 months, another 5% is applied on top. Daily interest also runs from the date payment was due. As of January 2026, HMRC‘s late payment interest rate is 7.75%.

These penalties cover income tax, National Insurance contributions, student loan deductions, Construction Industry Scheme (CIS) deductions, and Class 1A and 1B NICs on benefits in kind.

What If You Simply Can’t Pay?

If cash flow is the problem, the worst thing you can do is go quiet. HMRC would rather agree a payment plan than chase an escalating debt, so contact them early and ask about a Time to Pay arrangement, which lets you spread what you owe in instalments. Left unaddressed, it can escalate quickly. 

HMRC can move from reminder letters to debt collection, direct recovery from your bank accounts, and, in the most serious cases, a Winding-up Petition under the Insolvency Act 1986. 

If you are concerned about your PAYE position, our tax advice service can help you understand your options before things escalate. Getting in touch early gives you far more options.

What Happens to Employees If Payroll Is Late?

Late pay isn’t just a compliance issue. It’s a people issue too. When wages don’t arrive on time, employees face missed direct debits, unexpected overdraft charges, and the very real stress of not knowing when money is coming. Trust goes quickly and takes time to come back.

Under the Employment Rights Act 1996, employees have a legal right to be paid on their agreed pay date. An employer who fails to do this may face a grievance, a claim for unlawful deduction of wages, or, in more serious cases, legal action through an Employment Tribunal. If there is also confusion about what an employee should actually be receiving, our guide on gross pay vs net pay explains the difference.

What Can an Employee Do If They Have Not Been Paid?

If an employee has not received their wages on time, the recommended steps are: 

1. Check their payslip and employment contract to confirm the expected pay date and amount
2. Raise the issue informally with their employer, payroll team, or line manager
3. If the matter is not resolved, submit a formal written grievance
4. Seek free advice and support from ACAS
5. If the issue remains unresolved, make a claim to an Employment Tribunal for unlawful deduction of wages

Short delays caused by payroll errors or banking issues happen, but they should be corrected promptly. Extended or repeated delays are a different matter and may constitute a breach of contract. 

Why Does Payroll Run Late?

Most late submissions trace back to the same set of issues:

• Payroll or administrative errors, such as miscalculations or missed submissions 
• Outdated payroll software or system failures
• Staff changes, including starters, leavers, and pay changes that are not updated in time
• Cash flow difficulties that lead employers to delay PAYE payments
• Miscommunication between HR, finance, and payroll teams
• Incomplete or inaccurate RTI filings
• High-pressure periods such as year-end, bonus runs, or maternity and paternity changes

Many of these issues are preventable with the right systems and processes in place.

What to Do If You Have Submitted Payroll Late

If you realise payroll has gone in late, act quickly.

1. Submit the missing FPS or EPS immediately

Do not wait. Filing the return as soon as possible limits the risk of HMRC raising a specified charge and gets things moving in the right direction. Make sure you file the return for the correct month. Do not rely on updating figures in your next submission.

2. Calculate what you owe

Check your payroll records, FPS submissions, and any HMRC correspondence to confirm the exact amount outstanding, including any penalties or interest already applied. Not sure how long you should have been keeping those records? Our guide on how long to keep payroll records in the UK covers exactly that. If you are unsure of the figures, a payroll specialist can help you work out exactly where you stand.

3. Contact HMRC

Do not wait for them to come to you. Getting in touch early can make a real difference to how HMRC handles it. If you cannot pay in full immediately, you may be able to agree a Time to Pay arrangement, which allows you to spread the debt in instalments.

4. Pay the outstanding amount as soon as possible

Interest builds every day the debt remains unpaid. Paying quickly also shows willingness, which matters if you are negotiating a penalty reduction or payment plan.

5. Review what went wrong

Once things are settled, work out what caused it. Was it a process gap? A software issue? A staffing problem? Fix the cause, not just the symptom.

Can You Appeal a Late Payroll Penalty?

Yes. HMRC allows employers to appeal penalties if the charge is incorrect or there was a reasonable excuse for the late submission.

Penalty notices are issued quarterly and include details of how to appeal. If you pay the penalty within 30 days of receiving the notice, HMRC will not charge additional interest on the penalty itself.

Accepted grounds for appeal include:

• Serious illness or bereavement
• A fire, flood, or other natural disaster
• IT or software failure beyond your control
• A genuine belief that the return was submitted on time
• Theft or crime affecting your business

You can appeal online through HMRC’s PAYE for Employers service. Log in and select ‘Appeal a penalty’. You can also write to HMRC’s National Insurance Contributions and Employers Office. Whichever method you use, include the unique ID shown on the penalty notice. You will need it to identify the specific penalty you are challenging.

How to Prevent Late Payroll Submissions in Future

Here is what we recommend to keep payroll running on time:

• Use up-to-date payroll software that automates RTI submissions and sends deadline reminders
• Keep employee records current and update starters, leavers, and pay changes as soon as they happen
• Reconcile payroll figures before every submission, not after
• Train your payroll team on HMRC deadlines, RTI requirements, and what to do if something goes wrong
• Plan for busy periods such as year-end or bonus runs, when errors are more likely
• Account for bank holidays and processing delays by paying a day early when there is any doubt
• Monitor HMRC correspondence and act quickly on any reminders or queries

If late payroll keeps coming up, the current setup probably needs a rethink. Outsourcing payroll to a specialist takes the pressure off your team entirely and means submissions go in correctly every time.

Need Help Getting Payroll Back on Track?

Dealing with a late payroll submission can feel stressful, especially when HMRC penalties and employee relations are involved. The good news is that with the right support, most situations can be resolved and prevented from happening again.

At DH Business Support, we offer a fully managed payroll service that takes the pressure off your team. From RTI submissions and PAYE compliance to resolving issues with HMRC, we are here to help. 

Get in touch with our team to find out more.

Frequently Asked Questions

What happens if payroll is submitted late to HMRC?

HMRC can issue monthly late filing penalties ranging from £100 to £400, depending on the number of employees in your PAYE scheme. They can also raise a specified charge based on an estimate of what you owe. Repeated late submissions in the same tax year increase the risk of escalating penalties.

Is there a grace period for late payroll submissions?

HMRC operates a three-day easement, meaning a penalty will not usually be issued if your FPS is filed within three days of the pay date. However, employers who regularly rely on this may still be contacted by HMRC or face penalties. The safest approach is always to file on or before payday.

What is the penalty for late PAYE payment?

Penalties range from 1% to 4% of the unpaid amount, depending on how many times you have paid late in the current tax year. An additional 5% is charged after six months and again after twelve months if the amount remains unpaid. Daily interest also applies throughout.

Can an employee take legal action if their wages are late?

Yes. Under the Employment Rights Act 1996, employees have a legal right to be paid on their agreed pay date. If an employer fails to do this, employees can raise a formal grievance, seek advice from ACAS, or make a claim to an Employment Tribunal for unlawful deduction of wages.

What should I do if I have submitted payroll late?

File the missing return as soon as possible, contact HMRC proactively, and pay any outstanding amounts promptly to limit penalties and interest. Then review your payroll processes to understand the cause of the delay and put measures in place to prevent it from recurring.

Can HMRC take legal action for unpaid PAYE?

In serious cases, yes. HMRC can escalate to debt collection, make direct recoveries from business bank accounts, and, in extreme circumstances, file a Winding-up Petition under the Insolvency Act 1986, which could force a company into liquidation. Contacting them early is always the better option.

What is a Time to Pay arrangement?

A Time to Pay arrangement is an agreement with HMRC that allows you to pay an outstanding tax debt in instalments over an agreed period. It will not eliminate penalties or interest already applied, but it can help if you are unable to pay the full amount immediately. You need to contact HMRC proactively to discuss this option.