Payroll mistakes can happen, even when you have a careful process. A tax code may be entered incorrectly, an overtime payment may be missed, the wrong National Insurance category may be used, or a leaver may be reported with the wrong date. The important thing is not to ignore the error or hope it balances itself out next month.

If you have made a payroll mistake, you need to act quickly, check what has gone wrong, correct the employee’s pay where needed and update HMRC in the right way. Working with payroll services Stockport can help you put the error right and reduce the chance of it happening again.

Payroll is a significant part of the UK tax system. ONS and HMRC data showed 30.2 million payrolled employees in the UK in April 2026, with median monthly pay at £2,627. That means payroll errors are not just internal admin issues. They affect employees, HMRC records and business cash flow.

Do not panic, but do not delay

The first step is to stay calm and work out exactly what has happened. Payroll errors are often fixable, but the correction depends on the type of mistake, the tax year, whether the employee was underpaid or overpaid, and whether the error has already been reported to HMRC.

You should avoid making quick adjustments without understanding the figures. A rushed correction can create a second error. Instead, check the original payroll report, the payslip, the Full Payment Submission, the employee’s records and any supporting documents such as timesheets, holiday records or bonus calculations.

Once you know the cause, you can decide whether the correction should be made in the next regular payroll run or through an additional submission.

Identify the type of payroll error

Different payroll errors need different treatment. Before you correct anything, decide which category the mistake falls into.

• Incorrect gross pay
• Incorrect tax deduction
• Incorrect National Insurance deduction
• Wrong employee details
• Wrong start date or leaving date
• Incorrect payment date on the FPS
• Missed overtime, commission or bonus
• Incorrect pension deduction
• Incorrect student loan deduction
• Late or missed HMRC submission

This matters because HMRC guidance treats some corrections differently. For example, correcting a wrong payment amount is not the same as correcting an employee’s start or leaving date.

If you paid the employee too little

If an employee has been underpaid, you should pay them the missing amount as soon as possible. This is especially important where the mistake affects wages, overtime, commission, holiday pay or statutory payments.

HMRC guidance says that where an employee has been underpaid, you should pay the amount owed and send an additional Full Payment Submission on or before the day of the extra payment. The additional FPS should show the difference between what was originally reported and the correct amount, with updated year-to-date figures.

You should also explain the correction clearly to the employee. A short note can help avoid confusion, especially if the extra payment appears separately from their normal pay. Keep a record of the error, the corrected figure and when the additional payment was made.

If you paid the employee too much

Overpayments need careful handling. You may be able to recover the money, but you should check the employee’s contract, your payroll records and the circumstances before making deductions from future pay.

You should also speak to the employee promptly and clearly. Explain what happened, how much was overpaid and how you propose to recover it. For many businesses, agreeing a sensible repayment plan is better than making a large deduction that creates financial pressure for the employee.

From a payroll point of view, you also need to make sure the year-to-date figures are corrected so HMRC records match the actual position. If you are unsure how to process the correction, it is better to get support before the next payroll run.

If the FPS contained the wrong pay or deduction figures

If the error has already been reported to HMRC, you may need to correct the Full Payment Submission. GOV.UK says that if you paid an employee the wrong amount or made incorrect deductions, you can usually correct the mistake by updating the year-to-date figures in your next regular FPS. You can also send an additional FPS before the next regular FPS is due.

When sending an additional FPS, HMRC says you should update the pay-period figures with the difference between the original and correct figures, correct the year-to-date figures, use the same payment date and pay frequency as the original FPS, and use the correction reason in the late reporting field.

This is where payroll software and accurate records matter. If the correction is entered in the wrong period or the year-to-date figures are not updated properly, the PAYE bill may still be wrong.

If the payment date was wrong

Payment date errors can affect HMRC records. GOV.UK says you should use the date you paid your employees in your FPS. If you sent an FPS with the wrong payment date, you should send an additional FPS with the correct payment date and use the correction reason in the late reporting field.

HMRC also says that a corrected FPS should be sent by the 19th of the tax month after the original FPS was sent. If the wrong date falls in a different tax month, you may need to realign the payroll to the correct tax period.

This can become complicated if the error crosses tax months, so it is worth checking the position before submitting corrections.

If an employee’s start or leaving date was wrong

Start and leaving date errors should also be handled carefully. HMRC guidance says that if you put the wrong start or leaving date for an employee in your FPS, you should update your payroll records with the correct date. It also says not to report the amendment in your next FPS, as this may create a duplicate record for the employee. :contentReference[oaicite:6]{index=6}

This is a useful reminder that not every payroll error should be fixed by simply changing the next submission. Some corrections require a more specific approach.

If you made a National Insurance error

National Insurance corrections depend on when the mistake happened and whether too much or too little was deducted. For current tax year errors, HMRC guidance says you should repay or deduct the balance from the employee and update the year-to-date figures in the next regular FPS or send an additional FPS.

If too little National Insurance was deducted, HMRC says you cannot recover more than the employee’s National Insurance contribution due that month. This means the recovery may need to be spread over more than one pay period.

This is another reason to avoid informal payroll adjustments. The rules can affect how much you can recover and when.

If you submitted payroll late

Employers usually need to send the FPS on or before employees’ payday, even if HMRC is paid quarterly rather than monthly. GOV.UK also says that if you find errors in an FPS, you should send a corrected FPS as soon as possible. 

If a late FPS is submitted without an acceptable late reporting reason, or if HMRC disagrees with the reason, HMRC may send an online penalty warning message and a penalty.

If this happens, do not ignore the message. Check the submission date, the payment date, the late reporting reason and whether the original payroll information was correct.

Tell the employee clearly

Payroll errors can damage employee trust if they are handled badly. If the mistake affects someone’s pay, explain what happened in plain English. Tell them whether they were underpaid or overpaid, how the correction will be made and when they should expect to see the adjustment.

You should also issue a corrected payslip or provide clear payroll information where needed. Employees should be able to understand how their pay has been calculated, especially when a correction changes their usual net pay.

Keep a record of the correction

Every payroll correction should be documented. Keep a note of the original error, the corrected amount, the reason for the mistake, the date it was identified, the date it was corrected and any communication with the employee or HMRC.

This helps if the employee raises a query later. It also helps you identify patterns. If the same mistake keeps happening, your payroll process may need to be reviewed.

Prevent the same error from happening again

Once the immediate problem is fixed, look at why the error happened. Was the wrong information entered? Was the payroll deadline too tight? Did an employee change not reach payroll in time? Was the software set up incorrectly?

Useful prevention steps include:

• Setting clear payroll cut-off dates
• Checking starter and leaver details before submission
• Reviewing overtime, commission and bonus records
• Keeping holiday and sickness records up to date
• Checking tax codes and National Insurance categories
• Reviewing payslips before employees are paid
• Keeping a monthly payroll checklist

How U&W Chartered Accountants can help

Payroll errors are stressful, but they can usually be corrected with the right approach. The key is to act quickly, check the facts, update HMRC correctly and communicate clearly with the employee.

At U&W, we help businesses manage payroll accurately, from regular pay runs to correcting payroll mistakes, handling HMRC submissions and keeping clear payroll records. Whether you have made a one-off error or want to improve your payroll process, we can help you stay organised and compliant.

Need help correcting a payroll mistake? Contact U&W today to discuss your payroll needs and get practical support before a small error becomes a bigger problem.