Basic PAYE Tools is free payroll software from HMRC for employers with fewer than 10 employees. It works out tax, National Insurance and student loan deductions, sends Full Payment Submissions and Employer Payment Summaries to HMRC, and produces payslips and P60s. It does not handle workplace pensions, it is not designed for agents or bookkeepers, and HMRC keeps no copy of your data, so backups are your responsibility.

What does Basic PAYE Tools actually do?

GOV.UK describes it as software that lets you perform most payroll tasks, including working out tax and National Insurance and sending that information to HMRC. HMRC’s user guide lists what it covers in practice:

  • calculating each employee’s tax, National Insurance and student or postgraduate loan deductions when you enter their pay
  • keeping an employee pay and deductions record and an employer payment record showing what you owe HMRC
  • sending a Full Payment Submission (FPS) each time you pay staff
  • sending an Employer Payment Summary (EPS) when nobody was paid in a tax month, to recover statutory payments, to claim CIS deductions suffered by a limited company, to claim or withdraw Employment Allowance, or to work out Apprenticeship Levy
  • checking or finding an employee’s National Insurance number through a verification request
  • calculators for statutory pay, including maternity, adoption, parental bereavement and neonatal care pay
  • payslips and P60s, saved as PDFs to print or email
  • payrolling benefits in kind, once you have registered to do so

For how these submissions fit together, see our guide to FPS and EPS.

Which employers can use it?

HMRC says the software is for businesses with fewer than 10 employees. Before you start you must be registered with HMRC as an employer and enrolled for PAYE Online, because submissions are authenticated with your Government Gateway details.

It suits a small company paying a director and a few staff, a household employing a nanny (see our guide to nanny payroll), or a business that has just taken on its first employee. GOV.UK states that it is not designed for agents or bookkeepers. The user guide explains why: data cannot be copied for a single payroll within the tool, which may not let a firm protect data properly or meet data protection law.

Employers who already use commercial software can still use Basic PAYE Tools alongside it to check a new employee’s National Insurance number or send an EPS, if their own software cannot do those tasks.

What are its main limits?

The biggest gap is pensions. HMRC’s user guide says the tools do not:

  • support automatic enrolment
  • calculate employer or employee pension contributions
  • check whether employees are eligible
  • send information to your pension provider

You enter pension contributions yourself, using figures from your provider. You still have legal workplace pension duties, so you will need a separate process or provider portal for them.

Other limits to plan for:

  • Tax code changes are manual. When HMRC sends a P6 or P9 notice, or new codes apply under the P9X guidance at the start of the year, you update each employee yourself before entering pay for the new year.
  • Backups are your job. The user guide says HMRC does not keep a copy of your data and cannot help if it is lost or destroyed. It suggests backing up after each pay period and storing the backup separately.
  • Do not uninstall it. GOV.UK warns that uninstalling the version you have been using will lose your payroll data.
  • Payslips need care with payrolled benefits. Because benefits are added to gross pay for tax, the net pay shown is not take home pay, and you add an explanation in the additional information box.
  • Payment dates are restricted. The date you enter must be in the current tax year, after the employee’s last payment and be the actual payday, not the date you run the payroll.

GOV.UK’s general payroll software guidance notes that some products cannot produce payslips, record pension deductions or pay people on different frequencies, so it is worth checking any alternative against the same list.

What computer do you need?

GOV.UK lists Windows 10 and 11, macOS 15 and 26, and Ubuntu Linux 24.04 LTS and 25.10, in 64 bit versions only, with Apple Silicon also supported on macOS. The minimum specification includes 4 GB of RAM, and you need an internet connection to submit, update and use email features. Updates are checked automatically if you select that option when you first install.

How does the payroll year work in it?

The user guide sets out the annual routine:

  1. Send an FPS on or before each payday, for every employee paid.
  2. If you pay nobody in a whole tax month, send an EPS by the 19th of the following month instead. If you do not, HMRC may estimate what you owe and send a specified charge.
  3. Send the final FPS of the year on or before the last payday before 5 April and mark it as final. If you forget, or paid nobody in the last period, send an EPS.
  4. Activate the new tax year. Current employees migrate automatically, and you choose whether to carry across any leavers.
  5. Give each employee employed on 5 April their P60 by 31 May.

Weekly, fortnightly and four weekly payrolls may need a week 53 payment, which the tool works out. Our payroll year end checklist covers the wider tasks, including expenses and benefits.

Can you correct mistakes from earlier years?

Yes, within limits. The user guide says you can change pay and deductions for a closed year from 2020 to 2021 onwards. You choose the year, open the employee and the tax month, change the payment and submit a revised month 12 FPS showing the corrected year to date figures. Our guide to correcting payroll errors in earlier years explains the HMRC rules behind this.

How might a small employer use it?

Illustration only. A two person company pays its director a monthly salary and employs one part time administrator. The director installs Basic PAYE Tools, adds the employer’s PAYE reference, sets up both employees with their codes and category letters, and enters pay on the 28th of each month. The tool calculates deductions, the FPS is sent on payday, and the employer payment record shows the total due to HMRC. Each April the director claims Employment Allowance through an EPS if the company is eligible (see Employment Allowance explained) and activates the new year. Pension contributions are worked out in the pension provider’s portal and keyed in manually.

What records must you keep?

The user guide says you must keep payroll records for the current and previous 3 tax years, and records proving you pay the National Minimum Wage for 6 years. Records must show total pay, all deductions and total hours worked, and you should keep any paper P6 notices. Late or missing submissions can lead to PAYE penalties, whichever software you use.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.