Small Business Owners: What's Your Biggest Challenge with Payroll and HMRC?

Hi everyone,

I'm interested to hear how other UK small business owners manage their payroll and accounting responsibilities.

One thing that often gets overlooked when running a small business is how quickly payroll can become complicated, especially when you're dealing with PAYE, National Insurance, workplace pensions and HMRC reporting.

Even a small mistake can create extra administrative work or lead to incorrect employee payments.

I'm curious about a few things:

1. Do you manage payroll yourself or use an accountant or payroll service?
2. What's your biggest challenge — calculating wages, dealing with HMRC, managing pensions or keeping up with changing regulations?
3. Have you found online payroll software helpful, or do you prefer having an accountant handle everything?

For anyone just starting out, one useful tip is to establish a clear payroll process from day one, including keeping accurate employee records, checking tax codes and submitting payroll information on time.

I'd be interested to hear what has worked for you, especially if you're running a small business with fewer than 10 employees.

Looking forward to hearing your experiences!

Tilly & Cooper Corporate Accountants

1. Self-managed or outsourced?
For businesses under 10 staff, the honest answer is that it depends on how many "odd" cases you have. Straightforward monthly salaries on standard hours are perfectly manageable in-house with decent software. The moment you add variable hours, statutory payments (SSP, SMP, SPP), student loan deductions, benefits in kind or a director on a non-cumulative tax code, the value of a bureau or accountant running it jumps sharply. A typical small-company payroll service costs a few pounds per payslip, which is cheap insurance against a late filing penalty.

2. The real pain points
Calculating wages is rarely the problem, the software does that. The challenges that trip people up are:

• Workplace pensions. Auto-enrolment assessment, opt-outs, postponement periods, the three-yearly re-enrolment and the Declaration of Compliance to The Pensions Regulator. Missing the declaration is one of the most common fines and it has nothing to do with HMRC.
• Tax code notices. P6 and P9 coding notices land in the PAYE online account and get ignored. Apply them late and the employee's net pay goes wrong.
• RTI timing. The Full Payment Submission must go on or before payday, not after. Repeated late FPS filings trigger automatic penalties once you are past the first default in a tax year.
• Annual changes. Employer NI moved to 15% with a £5,000 secondary threshold from April 2025, while Employment Allowance rose to £10,500. If nobody updates the settings, every payslip in the new tax year is wrong.

3. Software versus accountant
Online payroll software earns its keep for small employers. HMRC's free Basic PAYE Tools works but has no pension integration and no payslip design. Low-cost packages such as BrightPay or Moneysoft Payroll Manager handle RTI, auto-enrolment files and year-end P60s for well under £100 a year. The sensible middle ground many owners settle on: run payroll in software themselves, then have the accountant review year-end submissions, P11Ds and anything unusual like a redundancy or termination payment.

One practical habit worth adding to the day-one checklist: diarise the 19th/22nd of each month for PAYE payment and keep a separate bank pot for it. Cashflow, not calculation, is what usually causes the missed payments.