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Tax & Accounting

Reporting payment to hmrc if you pay your employees early in

By Ali Jaw ·

Paying your employees early—perhaps to meet their needs before a bank holiday or festive period—is a thoughtful gesture. However, it’s essential to understand how HMRC expects you to report this in your payroll records. Many employers overlook the reporting requirements, which can lead to compliance issues. In this post, we’ll walk you through what you need to do when you pay your team early and how to keep HMRC in the loop.

Understanding the Reporting Requirements

When you pay employees early, you’re not doing anything illegal. HMRC’s concern isn’t about when you pay—it’s about accurate reporting of those payments. Every penny paid to your employees must be reported via Real Time Information (RTI) submissions to HMRC, regardless of whether payment falls on the usual payday or not.

The key principle is straightforward: report the payment in the tax month it’s actually paid, not when it was originally scheduled. If you normally pay on the 28th but advance payment to the 20th, you’ll report it in that earlier pay period’s RTI submission.

Reporting via Real Time Information (RTI)

If you use payroll software—which most modern employers do—the process is relatively painless. Your software should allow you to process an early payment just as you would a normal one. The important steps are:

Create a separate pay run for the early payment rather than adjusting your scheduled pay run. This keeps your records clear and makes it easier to reconcile with bank statements. Log the payment date accurately in your system.

Submit your Full Payment Submission (FPS) to HMRC before or on the same day as payment. This tells HMRC exactly when money left your business and went to employees. HMRC operates on the principle that RTI submissions should match actual payment dates, so timing matters.

Check your tax codes and allowances are correct. An early payment doesn’t change an employee’s annual tax allowance, but you need to ensure you’ve applied the right code for the current tax year (2024/25 sees the Personal Allowance remain at £12,570 for most taxpayers). Mistakes here could lead to incorrect tax deductions.

Managing Multiple Pay Runs in the Same Month

Some employers pay employees early and then run a normal monthly payroll shortly after. This creates two FPS submissions in the same calendar month. This is perfectly acceptable, and HMRC’s systems are designed to handle it. However, you’ll need to:

  • Clearly label both pay runs to avoid confusion (for example, “Early Payment—April” and “Regular Payment—April”)
  • Ensure each submission references the correct payment date
  • Monitor your employees’ cumulative tax and National Insurance carefully across both runs to prevent over or under deduction

Many payroll systems have a “pay frequency” setting that you can override for one-off early payments without disrupting your standard schedule.

Statutory Deductions and Benefits

Remember that statutory obligations don’t pause because you’re paying early. You must still:

  • Deduct Income Tax using the correct code
  • Deduct National Insurance contributions (Class 1) at the appropriate rate (8% of earnings between £12,570 and £50,270 for 2024/25)
  • Make any pension contributions due
  • Process any court orders or salary sacrifice schemes

If an employee is due statutory sick pay or statutory maternity pay, early payment doesn’t affect the calculation—it’s based on the period worked, not the payment date.

Record-Keeping and Compliance

Keep meticulous records. Your payroll records should show:

  • The date payment was made
  • The gross amount paid
  • Tax and National Insurance deducted
  • The FPS submission date to HMRC

These records are critical if HMRC ever queries your returns. Ideally, maintain a simple spreadsheet or use your payroll software’s reporting tools to log all early payments separately. This demonstrates good governance and makes year-end reconciliation far simpler.

Year-End Considerations

When it comes to preparing P60s and annual returns, all payments—whether early or on schedule—are included based on the tax year (6 April to 5 April). An early payment in late March might actually relate to earnings for the following tax year, so ensure your records reflect the correct tax year for each payment.

Conclusion

Paying employees early is a kind, practical decision—just ensure your payroll reporting keeps pace. The golden rule is to report accurately to HMRC via RTI on the actual payment date, maintain clear records, and double-check tax codes and deductions. Most modern payroll software makes this straightforward, but it’s worth reviewing your process to avoid costly mistakes.

For tailored advice, contact Severn Accounting—we’re here to help.