Running payroll manually works - until it doesn't. Once you have employees, you're legally required to submit payroll data to HMRC in real time, manage pension auto-enrolment, and issue payslips that meet UK employment law requirements. Understanding your PAYE obligations as an employer is the foundation — the right payroll software for small UK businesses then turns those obligations into a 20-minute monthly task. The wrong choice leaves you exposed to HMRC penalties or locked into a platform built for payroll departments you don't have.
This shortlist is built for UK employers with 1 to 15 employees — people who need reliable, HMRC-compatible software without payroll expertise. BGE has evaluated each platform against the non-negotiables below. Here's what actually matters and which platforms deliver it.
What UK Payroll Software Must Do: The Non-Negotiables
Before comparing platforms, it helps to understand what UK payroll software is actually required to do. These aren't nice-to-haves — they're legal and operational requirements for any UK employer. BGE has covered each of these areas in detail, but below is a quick summary of what every qualifying platform must handle. If you're new to PAYE, it's worth reading our guide to setting up PAYE for the first time before you start evaluating software.
HMRC Real Time Information (RTI) submissions - you must report PAYE and National Insurance to HMRC on or before each payday, every pay period, without exception.
Payslip generation - employees have a legal right to an itemised payslip showing gross pay, deductions, and net pay before or on pay day.
Pension auto-enrolment - if you employ eligible workers aged 22 to State Pension age earning above the earnings trigger (£10,000 per year for 2026/27), you are legally required to enrol them in a qualifying pension scheme and make contributions.
National Insurance calculations - software must apply the correct NI category letters and both employee and employer NI contribution rates.
PAYE tax code management - applying the right tax codes, including emergency codes and mid-year code changes from HMRC.
RTI is not optional
HMRC's Real Time Information system requires a Full Payment Submission (FPS) on or before every payday. Late or missing submissions can trigger automatic penalties. Any payroll software you choose must handle RTI submissions directly - not via a manual export you send yourself.
The Best Payroll Software for Small UK Businesses: Our Shortlist
The UK payroll software market ranges from free tools with minimal automation to enterprise platforms designed for HR teams. The four options below consistently meet the non-negotiables for a small UK employer without overcomplicating the process.
Xero Payroll
Built into the Xero accounting platform, Xero Payroll is a strong choice if you're already using Xero for your bookkeeping. Payroll runs feed directly into your accounts, removing the manual journal entries that eat time when payroll and accounting are separate systems. It handles RTI submissions, auto-enrolment with NEST (the National Employment Savings Trust), and payslip distribution. Pricing is per-employee per-month (£1.50 on most plans, £1.00 on Ultimate) on top of your Xero subscription (from £28/month on Grow). Note that payroll cannot be added to the entry-level Ignite plan, so total costs should be assessed carefully for very small teams.
QuickBooks Payroll
QuickBooks Payroll integrates with QuickBooks Online; in the UK, the Core and Advanced payroll plans are only available as add-ons to a QuickBooks Online subscription and are not offered as a standalone product for employers using different accounting software. It automates RTI submissions, calculates PAYE and NI, and includes pension auto-enrolment support. The guided payroll run is particularly well-suited to first-time payroll administrators - the interface prompts you through each step rather than assuming you know what you're doing.
Sage Payroll
Sage has the longest track record in UK payroll software and its small business product - Sage Payroll - reflects that. It's more feature-rich than most small employers need, but that depth means it handles complex scenarios well: multiple pay rates, statutory pay calculations (SSP, SMP, SPP), and mid-year employee changes. RTI and auto-enrolment are both built in. It's a good choice if your payroll is slightly more complex than a simple salary run.
Brightpay
Brightpay is a UK-focused payroll product with a strong reputation among small employers and accountants. From the 2026/27 tax year, BrightPay is exclusively cloud-based and billed as a subscription - either monthly or annually - calculated on your highest recorded headcount in any billing period. Annual payment attracts a discount and can still work out competitively priced for employers with stable headcounts. It handles RTI, auto-enrolment with multiple pension providers, and produces clear payslips. Its employee self-service portal lets employees access payslips and P60s without you having to send them manually. From 2026/27, BrightPay operates exclusively in the cloud, so this feature is available to all users.
Free Payroll Software vs Paid: What You Actually Get
HMRC's Basic PAYE Tools is free and technically functional - it will submit RTI and calculate PAYE correctly. But it won't automate pension enrolment, doesn't integrate with your accounting software, and provides no employee self-service features. For a solo founder paying themselves a salary, it's adequate. For an employer with even two or three staff, the manual overhead quickly outweighs the cost saving.
When free is genuinely fine
If you're a sole director of a limited company paying yourself a salary below the National Insurance secondary threshold - £5,000 per year for 2026/27 - with no other employees, HMRC's Basic PAYE Tools covers your submission requirements. The moment you hire someone else, the case for paid software becomes strong.
Paid payroll software earns its cost through three things: time saved on manual administration, reduced risk of submission errors, and pension auto-enrolment handling that would otherwise require a separate process. For most small employers, the monthly subscription cost is comfortably covered by the time saved on a single payroll run.
How Each Platform Handles HMRC RTI Submissions
RTI compliance is the baseline requirement - but the quality of the experience varies. Here's how the shortlisted platforms approach it.
Xero Payroll - submits the Full Payment Submission automatically when you finalise payroll. You can review a pre-submission summary before confirming.
QuickBooks Payroll - RTI submission is built into the final step of the payroll run. The interface flags any errors or missing data before you submit.
Sage Payroll - handles FPS, EPS (Employer Payment Summary), and year-end submissions. Particularly strong on statutory payment calculations within the RTI framework.
Brightpay - submits RTI directly to HMRC with a confirmation log you can keep for your records. Also handles Earlier Year Update (EYU) submissions if you need to correct a previous year.
Check your PAYE reference before you submit
Every RTI submission uses your employer PAYE reference and Accounts Office reference. If these are entered incorrectly during setup, submissions will either fail or be allocated to the wrong account. Verify both references against your HMRC online account before running your first payroll.
Pension Auto-Enrolment: Which Payroll Tools Get This Right?
Auto-enrolment is where payroll software earns its keep - and where gaps between platforms become most visible. Under The Pensions Regulator rules, you must assess your workforce each pay period, enrol eligible workers, contribute to a qualifying pension scheme, and keep records that prove compliance. That's a substantial administrative burden if your payroll software doesn't handle it.
All four shortlisted platforms support auto-enrolment, but the depth of that support differs. Xero and QuickBooks both integrate with NEST - the government-backed scheme that all employers can use regardless of size - and will handle the contribution calculations and submission automatically. Sage has broader pension provider integrations and handles re-enrolment cycles, which are required every three years.
Employers must choose a re-enrolment date within a six-month window around their third anniversary and file a re-declaration of compliance with The Pensions Regulator within five months of that anniversary. BrightPay guides employers through the auto-enrolment process and prepares the supporting documentation, but the declaration of compliance itself must be submitted directly by the employer via The Pensions Regulator's online portal.
Auto-enrolment has a staging date - not a start date you choose
As a new employer, your auto-enrolment duties begin on the date your first eligible worker joins. You may postpone assessment for up to three months, but only if you issue a written postponement notice to employees within six weeks of your duties start date - if you miss that window, postponement is no longer available and duties apply from the original start date. Your payroll software must be set up and assessing your workforce from day one - not from the date you get around to configuring it.
Our Recommendation: Best Payroll Software by Business Size
There isn't a single best payroll tool for every small employer - but there are clear patterns in which platforms suit which situations.
1 to 3 employees, already using Xero: Xero Payroll is the obvious choice. The accounting integration removes duplication and the payroll run is straightforward for first-timers.
1 to 3 employees, not committed to an accounting platform: QuickBooks Payroll's guided interface is the most beginner-friendly on the shortlist. The step-by-step payroll run is well-designed for someone who has never processed payroll before.
4 to 15 employees or slightly complex payroll: Brightpay's annual pricing structure and multi-provider pension support make it a strong choice as your team grows. Sage is worth considering if you need deeper statutory pay handling.
Sole director, salary only, no other staff: HMRC's Basic PAYE Tools is adequate for this specific scenario. When that changes, move to a paid platform.
How to Switch Payroll Software Without Missing an HMRC Deadline
Switching payroll software mid-year is more common than most guides acknowledge — and it's manageable if you sequence it correctly. The risk isn't the switch itself — it's making a submission from two systems for the same pay period, or making none at all. BGE's guidance on common PAYE mistakes and how to avoid them covers the reconciliation errors that most often arise when employers change systems mid-year.
Switching Payroll Software: A Safe Sequence
Pick your switch point
The cleanest time to switch is at the start of a new tax year (6 April), when no year-to-date data needs to be carried over. Mid-year switches are possible but require careful transfer of all year-to-date figures and carry a higher risk of RTI discrepancies with HMRC. Mid-year switches are possible but require you to carry over year-to-date figures for every employee - gross pay, tax paid, NI paid, and pension contributions.
Export your current data
Before you close your existing software, export or record each employee's year-to-date figures. Most platforms produce a P11 working sheet or equivalent. This data must be entered into the new system before the first payroll run.
Set up the new platform before your next payday
Enter your PAYE reference, Accounts Office reference, employer details, and all employee records in the new system. Import year-to-date figures carefully - errors here will produce incorrect RTI submissions for the rest of the year.
Run a test payroll before going live
Most platforms allow you to run a payroll without submitting to HMRC. Use this to verify that net pay figures match what you'd expect before your first live submission.
Submit from one system only
Once you've submitted your first FPS from the new platform, do not submit anything from the old system for the same period. Double submissions create HMRC reconciliation problems that can take weeks to resolve.
If you're moving payroll away from an accountant rather than switching software, the same sequencing applies — you need year-to-date data from your accountant before you can run payroll independently. Build in lead time to request this, particularly if your accountant uses bureau payroll software that doesn't produce standard exports. For a fuller picture of what this involves, see our guide to taking payroll in-house as a small employer.
Illustrative example - based on a common UK founder scenario, not a specific documented case
A sole trader turned limited company director in Manchester with two part-time employees was processing payroll manually through HMRC Basic PAYE Tools and managing auto-enrolment by spreadsheet. The challenge: ensuring pension contributions were being calculated correctly and re-enrolment was tracked. After switching to Brightpay at the start of a new tax year, the founder entered each employee's year-to-date figures, connected the NEST pension integration, and reduced a two-hour monthly admin task to under 30 minutes. The pension compliance records were automatically generated for The Pensions Regulator - a step that had previously been missed.
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