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HMRC Basic PAYE Tools Guide: Set Up and Run Payroll

Set up an employer, add employees, run payroll, send FPS or EPS, keep records and back up HMRC Basic PAYE Tools.

Payroll journey

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Quick answer

HMRC Basic PAYE Tools is free payroll software for employers with fewer than 10 employees. It can calculate PAYE tax, National Insurance and student or postgraduate loan deductions, create payslips, maintain basic payroll records and send Real Time Information reports to HMRC.

It can be a sensible starting point when the payroll is small and straightforward. The important limitation is in the name: it is a basic, locally installed payroll tool. It does not assess employees for automatic enrolment, calculate the pension contributions due, connect to a pension provider or bring timesheets, employee changes and approvals into one shared workflow.

This guide follows one fictional employer, Orchard & Field Services Ltd, and one fictional employee, Amina Patel. The example information is not suitable for a live payroll. Never send a test or dummy Full Payment Submission to HMRC.

Before you open Basic PAYE Tools

You must register as an employer and enrol for PAYE Online before using Basic PAYE Tools to calculate and submit payroll. Wait for HMRC to issue the employer PAYE reference and Accounts Office reference, unless maintained HMRC guidance gives you a specific route for a first payday while a reference is still outstanding.

Gather the following employer information:

  • legal employer name and address;
  • employer PAYE reference;
  • 13-character Accounts Office reference;
  • Corporation Tax or Self Assessment Unique Taxpayer Reference, where applicable;
  • Government Gateway credentials for PAYE Online;
  • the tax year in which the first BPT submission will be made; and
  • a written pay calendar showing the real paydays.

For each employee, gather the identity and starter information that applies, including a P45 or completed starter checklist, start date, pay frequency, authorised pay, tax code basis, National Insurance category, student or postgraduate loan instruction and a unique payroll ID.

Do not use a convenient default when information is missing. Stop and follow the appropriate HMRC starter, tax-code or payroll guidance.

Interactive checklist

Before setup

0 of 10 complete. Progress stays on this device.

1. Add the employer

Open the latest version of Basic PAYE Tools and select Add an employer.

Enter the employer’s legal name, employer PAYE reference and Accounts Office reference exactly as HMRC issued them. Add the applicable Unique Taxpayer Reference and select the tax year for the employer’s first RTI submission through BPT. Complete the employer address and answer the employer National Insurance and Employment Allowance questions from the employer’s actual circumstances.

Before continuing, compare both PAYE references with the HMRC registration letter. The employer PAYE reference identifies the PAYE scheme. The Accounts Office reference is also used when paying HMRC. They are not interchangeable.

Checkpoint before adding employees

Confirm:

  • the correct legal employer was created;
  • the references belong to that employer;
  • the intended tax year is active;
  • automatic updates are enabled; and
  • the people allowed to use the computer and payroll data are documented.

BPT stores its employer database locally. Treat the computer as part of the payroll control environment, not simply as a convenient place to install software.

2. Add an employee

From the employer details page, select Manage employees, then Add an employee. Choose New and current for an ordinary new or current employee. BPT also provides separate routes for non-individual payments and certain pension lump sums; use the applicable HMRC guidance if either is relevant.

Enter the employee’s:

  1. name, address, date of birth and gender required for payroll reporting;
  2. National Insurance number and passport number, when known;
  3. unique payroll ID;
  4. normal weekly hours;
  5. director status and appointment date, if applicable;
  6. actual employment start date;
  7. starter basis, using the applicable P45 or starter information;
  8. pay frequency;
  9. tax code and basis;
  10. National Insurance category; and
  11. student or postgraduate loan instruction.

Only change a tax code when HMRC tells you to or maintained HMRC guidance requires the standard new-tax-year action. Do not copy another employee’s code because their pay appears similar.

The payroll ID is particularly important. It distinguishes an employment in RTI reporting. If someone is re-employed in the same tax year, do not reuse their previous payroll ID.

Employee check before the first payment

Compare the BPT record with the source documents. Check names and dates carefully, but do not overlook the fields that affect calculation and reporting: starter basis, previous pay and tax where applicable, tax-code basis, NI category, loan instruction, director status, pay frequency and payroll ID.

Keep the starter evidence securely. The BPT record does not replace the P45, starter checklist, employment terms, pay authorisation or other source documents.

3. Add employee payments and review the result

Add every employee to BPT before entering payments for the pay period.

Select the correct employer and tax year, then go to Manage employees, choose the employee, select Employee payments and then Add employee payment.

Enter the date on which the employee will actually be paid. This is not necessarily the date you prepare payroll. HMRC says the payment date should be the real payday and should use the normal payday even when it falls on a non-banking day.

Enter the applicable pay and other reportable amounts. BPT can calculate PAYE, National Insurance and student or postgraduate loan deductions. Statutory payments are calculated through the relevant BPT calculator first and the result is then entered in the payment.

For pension contributions, BPT only records amounts supplied through the employer’s separate pension process. Ask the pension provider or adviser which contribution values apply and whether the arrangement uses net pay or relief at source. BPT does not assess the workforce, calculate the contributions or send information to the pension provider.

Review the employee payment details before saving. Compare:

  • payment date and pay period;
  • gross and taxable pay;
  • National Insurance earnings;
  • tax code and NI category;
  • PAYE, employee NI and loan deductions;
  • employer NI;
  • pension values supplied by the pension process;
  • statutory payments;
  • other deductions; and
  • net pay.

Investigate an unexpected result rather than changing an input merely to produce the expected take-home pay.

Create and deliver the payslip

After saving the payment, open the employee’s payment page and select Payslip. Save the payslip as a PDF or print it. HMRC’s current guide says BPT can create payslips, despite some older third-party articles saying otherwise.

Give the employee or worker their payslip on or before payday. Obtain their agreement before sending the PDF by email and use a delivery method appropriate for payroll data.

4. Send the FPS

An FPS reports employee payment and deduction information to HMRC. Send it on or before payday unless an official exception applies.

After all employees for the payday have been entered and checked:

  1. open Outstanding submissions;
  2. confirm the employees and payment information included;
  3. select Send all outstanding submissions;
  4. continue to submission authentication;
  5. enter the Government Gateway user ID and password; and
  6. wait for the submission results.

Do not treat pressing Send as proof of acceptance. Check whether the submission is successful, on hold, failed or expired. Retain the successful response or investigate the failure before repeating an action.

5. Decide whether an EPS is required

An EPS is not an automatic final step after every FPS.

Use BPT’s EPS process when the employer has applicable employer-level information to report, such as:

  • no employees were paid during a whole HMRC tax month;
  • recoverable statutory payments or related compensation apply;
  • a limited company suffered qualifying CIS deductions;
  • an Employment Allowance claim or withdrawal is required; or
  • an Apprenticeship Levy amount must be reported.

Check the current conditions and values before creating the EPS. For recoverable amounts, enter the maintained figures, calculate the amount due to HMRC and send the outstanding EPS using the PAYE Online credentials.

HMRC says an EPS affecting the amount due for the period should reach it by the 19th of the following tax month. A late EPS may be applied against the next period instead. Use HMRC’s current EPS instructions for the detailed route.

If no employees were paid, make sure the quiet period covers the complete tax month from the 6th to the following 5th. A no-payment EPS does not correct a missed FPS for someone who was actually paid.

6. Produce and retain payroll records

BPT provides useful payroll outputs, but the employer remains responsible for the complete record.

Within BPT, retain or produce:

  • employee pay and deductions records;
  • employee year-to-date summaries;
  • Employer Payment Records;
  • successful FPS and EPS submission history;
  • payslips;
  • P45s for leavers;
  • P60s for eligible employees after tax year end; and
  • the final submission and new-tax-year records.

Also retain the source and control evidence that sits outside BPT:

  • contracts and pay authorisations;
  • P45s and starter checklists;
  • approved hours, overtime, bonuses and other variable-pay inputs;
  • statutory-payment evidence;
  • pension assessments, communications, contribution schedules and provider confirmations;
  • attachment-order or other deduction instructions;
  • employee payment evidence;
  • HMRC payment and allocation evidence;
  • corrections and the reason for them; and
  • approvals and access records.

HMRC says payroll records generally need to be kept for the current and previous three tax years. National Minimum Wage records have a separate six-year requirement. Other employment, pension and accounting records may have different retention periods, so do not delete everything when the BPT minimum has passed.

7. Back up and restore BPT data

HMRC does not retain a recoverable copy of the BPT employer database. If the computer or local data is lost, HMRC cannot restore it for you.

After each completed pay period:

  1. return to the BPT homepage;
  2. select Back up your data;
  3. check the backup filename and location;
  4. select Save backup;
  5. save the .bak file to a protected location separate from the computer; and
  6. record that the backup completed.

Do not rely on a backup stored only on the same device as BPT. Keep at least one protected copy separately and control who can access it because the backup contains payroll personal data.

To restore, select Restore your data on the BPT homepage, choose the applicable backup and remain on the page until the restoration completes. Periodically test that the documented recovery process can locate and restore the intended backup. A filename alone is not proof of recoverability.

Where Basic PAYE Tools works well

BPT is a credible choice when:

  • the employer has no more than nine employees;
  • payroll is straightforward and controlled by one trained person with reliable cover;
  • pay inputs are stable and easy to verify;
  • the employer can run a separate workplace-pension process;
  • local installation and backups are acceptable;
  • manual payslip delivery is manageable; and
  • the employer does not need connected HR, time, accounting or pension workflows.

It is free, maintained by HMRC and designed for the core PAYE calculations and reporting a micro-employer needs. Moving to commercial software is not automatically better.

When the wider process starts to fall short

BPT can continue doing its HMRC job correctly while the process around it becomes difficult.

Workplace pensions

BPT does not check pension eligibility, calculate employer or employee contributions or send data to the pension provider. As the workforce or pay patterns become more varied, the separate assessment, contribution and reconciliation process can become the most demanding part of payroll.

Employee self-service

Employees cannot log in to BPT to obtain payslips, update their details or submit changes. The employer must create, save and distribute documents and then manage employee questions through another channel.

Multi-user access and continuity

BPT is locally installed. It is not a shared cloud workspace with roles for preparers, reviewers and approvers. A second person may be able to use the same controlled computer, but that is different from independent multi-user access, permissions and an audit trail.

Integrations and repeated entry

BPT does not connect approved timesheets, leave, expenses, employee changes, pension providers, accounting or banking into one workflow. Each spreadsheet, email and re-keying step adds another place where the current version or approval status can become unclear.

A growing workforce

The hard limit is fewer than 10 employees, but operational strain often appears earlier. Warning signs include:

  • payroll inputs arrive through several spreadsheets or message threads;
  • the same hours or employee changes are keyed into more than one system;
  • managers cannot see what remains unapproved before payroll;
  • payslip distribution and employee questions take longer each month;
  • pension assessment and reconciliation are maintained separately by hand;
  • only one person can confidently operate or recover payroll; or
  • nobody is certain which file is the current approved record.

These are workflow signals, not evidence that BPT is defective.

The next step after manual payroll administration

When spreadsheets and hand-offs begin building up, the next step is to map the whole route from work records to approved pay—not simply replace the FPS button.

Workmax is designed for employers that need employee records, approved hours, payroll review, payslips and HMRC-recognised online PAYE reporting in a connected workflow. It may reduce repeated entry and make readiness and exceptions more visible. An accountant, payroll bureau or another standalone product may be a better fit for a different employer.

Start with how to choose payroll software, then compare providers against your actual pay frequencies, pension arrangement, approval roles, integrations, recovery needs and support expectations. If Workmax is one of the options, see how Workmax payroll works.

Sources and review

Reviewed 26 July 2026 against Basic PAYE Tools version 26.1.26134.173934. This guide is general information and does not confirm that a particular payroll, FPS, EPS, pension process or HMRC payment is correct.

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