How Do I Correct a Payroll Mistake After Submitting to HMRC?

Introduction

Payroll mistakes happen, even in the most organised charities or small businesses. You might discover that an employee was overpaid, a deduction was missed, or the wrong tax code was used. Once payroll has been submitted to HMRC through Real Time Information (RTI), you cannot simply delete or amend it — you must correct the error using HMRC’s approved process.

This article explains how to fix payroll errors after submission, what HMRC expects from employers, and how to prevent similar mistakes in the future.

Why Payroll Mistakes Happen

Common payroll errors include:

• Entering incorrect working hours or salary figures

• Applying the wrong tax code or National Insurance category

• Forgetting to process a new starter or leaver

• Duplicating a payment

• Missing a statutory payment such as sick pay or maternity pay

• Reporting the wrong payment date

These errors can affect both employees’ pay and HMRC records, so it is important to correct them quickly and accurately.

Step 1: Identify and Record the Error

Before making any corrections, confirm exactly what went wrong and which pay period it affects. Check payslips, timesheets, and payroll reports to verify:

• Who was affected

• The nature of the mistake (for example, underpayment or overpayment)

• The specific tax month or submission where the error occurred

Keep a written record of the mistake and the steps you take to correct it. This ensures transparency if HMRC later asks for clarification.

Step 2: Determine If You Need to Send an Updated Submission

How you correct a payroll mistake depends on when you discover it.

If the mistake is found before the next pay run:

You can usually correct it by sending an additional Full Payment Submission (FPS) for the same pay period. Include only the corrected figures for the affected employees. Most payroll software allows you to do this automatically.

If the mistake is found after the next pay run:

You can make the correction in your next regular payroll. Adjust the employee’s year-to-date figures so they reflect the correct totals. This will update HMRC records when you send your next FPS.

If the tax year has already ended:

Once 5 April has passed, you cannot amend the previous year’s figures through normal submissions. Instead, you must send an Earlier Year Update (EYU) or a corrected FPS (depending on your software). This tells HMRC what the correct figures should have been for the previous tax year.

Most modern payroll systems have built-in options to submit EYUs or correction reports directly.

Step 3: Adjust Employee Pay

If an employee was underpaid, pay the difference in the next pay run and ensure their payslip clearly shows the correction.

If they were overpaid, discuss repayment terms with them before making deductions. You can:

• Deduct the overpayment from their next pay (with written consent)

• Set up an instalment plan if repayment in full is not possible

Always handle overpayments sensitively and in line with employment law.

Step 4: Correct National Insurance and Tax

Payroll software normally recalculates tax and National Insurance automatically once you enter the corrected figures. If you manage payroll manually, you must use HMRC’s guidance or Basic PAYE Tools to ensure the correct adjustments are made.

Incorrect tax or NI payments can create discrepancies on HMRC’s system, so always check your PAYE online account after submitting the correction.

Step 5: Update HMRC Records

When you send your correction, HMRC updates its records automatically based on your latest RTI submission. You do not need to call HMRC unless the issue is complex or the correction does not appear on your online account after a few days.

For serious or repeated errors, HMRC may ask for an explanation or supporting evidence. Keeping accurate documentation will help resolve any questions quickly.

Step 6: Check Pension Contributions

If your organisation has a workplace pension scheme, you must also correct any pension contributions affected by the payroll error. Notify your pension provider and submit updated contribution data if necessary.

Failure to correct pension deductions can breach auto-enrolment regulations, so deal with this step promptly.

Step 7: Review Employer Payments

Once HMRC records are updated, check that your PAYE liability matches your payments. If you have overpaid or underpaid HMRC as a result of the mistake, you can:

• Offset any overpayment against your next PAYE bill

• Contact HMRC to request a refund or arrange repayment if you owe money

Reconcile your payroll records, bank payments, and HMRC account to ensure everything aligns.

Example Scenario

Imagine a small charity, Hope Together UK, discovers that a new employee’s tax code was entered incorrectly in May. This caused an underpayment of Income Tax.

The payroll officer corrects the employee’s tax code in the June payroll and adjusts year-to-date figures. The updated FPS automatically sends the corrected totals to HMRC. The employee’s payslip shows the tax correction, and both the charity’s and HMRC’s records are now accurate.

Because the error was fixed in the next pay run, no EYU or special submission was needed.

Step 8: Communicate with Employees

Always inform employees when a correction affects their pay or deductions. Provide them with an updated payslip and explain what has changed. Transparency helps maintain trust and prevents confusion when employees check their tax statements.

Preventing Payroll Mistakes in Future

While occasional errors are unavoidable, good payroll processes reduce the risk. To prevent future problems:

• Use reliable payroll software that automatically updates tax and NI rates

• Double-check entries for new starters and leavers

• Reconcile payroll reports monthly against bank payments and HMRC liabilities

• Keep up to date with HMRC guidance and legislation changes

• Consider having your accountant or payroll provider review calculations periodically

When to Ask for Professional Help

If your charity or business frequently encounters payroll issues, or if you are unsure how to correct an error, seek advice from an accountant or payroll specialist. They can:

• Check your PAYE submissions and help correct discrepancies

• Liaise with HMRC on your behalf

• Set up payroll systems that minimise errors

• Train staff on correct payroll procedures

Outsourcing payroll may also be a cost-effective way to ensure compliance and save time.

Conclusion

If you make a payroll mistake after submitting to HMRC, do not panic — most errors can be corrected easily with an additional or updated submission. The key is to identify the mistake, update your records, and act quickly to ensure your employees and HMRC receive accurate information.

By using payroll software, keeping thorough records, and working with an accountant when needed, you can avoid penalties, maintain compliance, and ensure your payroll runs smoothly all year round.