Payroll Errors How to Correct an Incorrect PAYE Submission

 Submitting an incorrect Pay As You Earn (PAYE) report to HM Revenue & Customs (HMRC) is a common issue faced by UK employers, payroll bureau administrators, and business owners. Whether an employee was paid the wrong amount, an incorrect tax code was applied, or starter/leaver details were omitted, HMRC provides clear mechanisms to fix these errors.

Correcting payroll errors promptly ensures your employees pay the correct tax and National Insurance contributions (NICs) while keeping your business fully compliant with Real Time Information (RTI) reporting rules.

Working with experienced accountants in Ilford or dedicated payroll specialists helps ensure your RTI submissions, FPS/EPS adjustments, and year-end PAYE reconciliations stay accurate and compliant.

Payroll Errors How to Correct an Incorrect PAYE Submission

How HMRC PAYE Reporting Works (RTI Overview)

Under Real Time Information (RTI), employers must report payroll information to HMRC on or before every payday using two main submission types:

1. Full Payment Submission (FPS): Sent on or before each payday to report employee pay, tax deducted, National Insurance, and student loan payments.

2. Employer Payment Summary (EPS): Sent monthly (by the 19th) to claim statutory pay recoveries (e.g., SMP, SPP), Employment Allowance, or to report a period of no payments.

When an error occurs on a previous FPS or EPS, the method you use to fix it depends on when the error is discovered relative to the current tax year.

Correcting PAYE Errors in the Current Tax Year

If you discover a payroll error within the current tax year (6 April to 5 April), you have two primary options depending on your software and payroll schedule.

┌─────────────────────────────────────────────┐
              CORRECTING CURRENT TAX YEAR ERRORS                                                      
                                                                                                                                                  
   Option A: Adjust on Next Regular FPS                       
   Update year-to-date (YTD) figures in the next pay period.  
                                                             
   Option B: Submit an Additional FPS                         
   Send an updated FPS for the original pay period immediately.
└─────────────────────────────────────────────┘

Option A: Adjust the Next Regular FPS (Most Common)

For minor calculation or payment errors discovered before the next pay run:

• Update the employee’s year-to-date (YTD) tax and pay figures in your payroll software.

• Include these corrected YTD figures on your next regular FPS submission.

• HMRC’s system automatically updates the employee’s records based on the corrected YTD totals.

Option B: Send an Additional FPS

If the error needs immediate resolution (e.g., significant overpayment or underpayment requiring an interim payment adjustment):

• Generate and submit an additional FPS for the pay period in which the error occurred.

• Report the correct year-to-date figures as of that pay period.

• Clearly indicate in your payroll software that this is a corrected submission for a previous period.

Correcting PAYE Errors for a Previous Tax Year

If you discover an error after the tax year has ended (after 5 April), the correction process depends on the date the mistake was identified.

Discovery Date	Required Action
Between 6 April and 19 April	Submit an overriding FPS for the ended tax year showing the final, correct year-to-date figures.
On or after 20 April	Submit a Full Payment Submission (FPS) showing the corrected final year-to-date figures for that previous tax year.

Historical Note: HMRC previously used the "Earlier Year Update" (EYU) submission for previous year corrections. However, since the 2020/21 tax year, HMRC requires all previous-year adjustments to be submitted via an FPS.

Common PAYE Mistakes and How to Fix Them

1. Wrong Tax Code Applied

If an incorrect tax code was used on a pay run:

• Update the employee's tax code in your payroll software to the correct HMRC code (e.g., from a notice received via P6/P9 or HMRC Online Services).

• The payroll software will automatically calculate any tax adjustment (refund or additional deduction) on a cumulative basis during the next pay run.

2. Employee Paid Too Much or Too Little

• Underpayment: Pay the remaining balance to the employee and adjust the next FPS or send an additional FPS to reflect the additional gross pay and correct deductions.

• Overpayment: Agree on a repayment schedule with the employee. Deduct the overpayment from future gross pay or collect the net overpayment directly, updating YTD figures on subsequent FPS filings accordingly.

3. Omitted Starter or Leaver Information

• If a new starter was missed on an FPS, include their details (starter checklist info, tax code) on the next FPS along with their YTD figures.

• If a leaver’s leaving date was omitted, include the leaving date and final pay figures on the next FPS.

What to Do If You Overpaid or Underpaid HMRC

Correcting an FPS changes your employer PAYE liability with HMRC.

• If you overpaid HMRC: The corrected FPS will show a lower PAYE/NI liability. You can reduce your next monthly HMRC payment by the overpaid amount or request a refund from HMRC if it is at the end of the tax year.

• If you underpaid HMRC: The corrected FPS will increase your liability. Pay the difference to HMRC as soon as possible to avoid late payment interest charges.

When to Seek Professional Payroll and Accounting Support

Payroll compliance requires precise record-keeping and strict adherence to HMRC deadlines.

       PAYROLL COMPLIANCE CHECKLIST
 ┌────────────────────────────┐
   [✓] YTD Tax & NI Figures Reconciled    
   [✓] Correct FPS / EPS Submission Sent  
   [✓] Employee Tax Codes Verified (P6/P9)
   [✓] HMRC Account Balance Checked       
 └────────────────────────────┘

Working with experienced professionals, whether you consult accountants in Ilford, work with accountants in Stratford, or coordinate with accountants in Brentwood, helps streamline your payroll operations. Expert accountants can assist with:

• Processing complex FPS and EPS corrections.

• Reconciling PAYE scheme balances with HMRC online accounts.

• Managing auto-enrolment workplace pension adjustments.

• Ensuring full compliance with Making Tax Digital and RTI regulations.

Frequently Asked Questions

Can I correct an FPS submission after the 19th of the month?

Yes. You can correct an error by sending an updated FPS with corrected year-to-date figures at any time. However, if the correction increases your tax liability for a previous month, HMRC may charge late payment interest on the outstanding amount.

How do I correct a mistake on an Employer Payment Summary (EPS)?

If you made a mistake on an EPS (such as incorrect statutory pay recovery or Employment Allowance claims), simply submit a new EPS for that same tax month with the correct figures. The new EPS will overwrite the previous submission.

What happens if I make a mistake in an employee's National Insurance number?

Update the National Insurance number in your payroll software immediately. The correct NI number will be transmitted on your next FPS. Do not create a new employee profile in your software, as this will duplicate records with HMRC.

Will HMRC penalise my business for PAYE reporting errors?

HMRC generally does not penalise employers for genuine, isolated mistakes if they are corrected promptly. However, penalties may apply if submissions are persistently late, inaccurate due to lack of reasonable care, or if underpaid tax is withheld intentionally.

Ensure Accurate Payroll and Compliance

Don't let payroll errors create tax discrepancies for your employees or complications with HMRC. From RTI filing management to year-end reconciliations and HMRC liaison, tailored payroll support keeps your business operating smoothly.

Contact our local payroll and accounting experts today to audit your PAYE records and streamline your payroll processes.