What are payroll records?

Published Thursday 23 July 2026

Table of contents

• What are payroll records?
• What payroll records should you keep?
• How long to keep payroll records
• What happens if you do not keep payroll records
• Digital or paper payroll records
• Best practices for payroll record keeping
• Simplify your payroll record keeping with Xero
• FAQs on payroll records

Key takeaways

• Payroll records include payslips, P45s, P60s, tax calculations, pension contributions and statutory payment details that HMRC may request during an inspection.
• You must keep PAYE records for at least 3 years from the end of the tax year they relate to, while minimum wage and holiday pay records must be kept for 6 years.
• Failing to maintain accurate payroll records can result in HMRC penalties of up to £3,000, estimated tax bills and difficulties resolving employee disputes.
• Cloud-based payroll software can automate calculations, store records securely and help you submit reports to HMRC on time.

What are payroll records?

Payroll records are the documents and data that detail how each employee is paid. They cover everything from gross pay and tax deductions to pension contributions and statutory payments. In the UK, HMRC requires employers to maintain these records as part of running PAYE (Pay As You Earn).

A payroll record typically includes:

• Pay rates and salary details
• Hours worked, including overtime
• Paid time off and holiday entitlement
• Bonuses and commission payments
• Benefits in kind
• Deductions such as income tax, National Insurance contributions (NICs) and student loan repayments
• Take-home (net) pay
• Tax codes and HMRC correspondence

You can keep payroll records in paper or electronic form. Both are acceptable to HMRC, though digital records offer practical advantages for storage, security and retrieval.

What payroll records should you keep?

UK employers must keep a range of payroll documents to meet HMRC requirements and protect themselves in the event of an audit or employee dispute. The specific records you need depend on the size and structure of your business, but most employers should retain the following.

• Payslips issued to each employee
• P45s for employees who leave
• P60s issued at the end of each tax year
• P11D forms reporting benefits in kind and expenses
• PAYE and NIC calculations for every pay period
• Tax code notices from HMRC
• Real Time Information (RTI) submissions, including Full Payment Submissions (FPS) and Employer Payment Summaries (EPS)
• Workplace pension records, including contributions and opt-out notices
• Employee personal details such as name, address, date of birth and National Insurance number
• Timesheets and attendance records
• Statutory payment records for Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Shared Parental Pay (ShPP)

Keeping all of these documents organised makes it easier to respond to HMRC enquiries and resolve any payroll queries from your team.

How long to keep payroll records

HMRC sets minimum retention periods for different types of payroll records. Getting these wrong can leave you exposed to penalties, so it is worth understanding exactly how long each category must be kept.

PAYE records: You must keep all PAYE records for at least 3 years from the end of the tax year they relate to. For example, records from the 2025/26 tax year (ending 5 April 2026) must be retained until at least 5 April 2029. This is set out in GOV.UK guidance on running payroll.

National minimum wage records: Since April 2021, you must keep records that prove you are paying at least the national minimum wage for 6 years. HMRC compliance officers can request these during an investigation.

Holiday pay and annual leave records: From 6 April 2026, provisions under the Employment Rights Act require employers to retain holiday pay records for 6 years. This applies to records of holiday entitlement, leave taken and holiday pay calculations.

Auto-enrolment pension records: You must keep records relating to automatic enrolment for 6 years, except for opt-out notices, which must be kept for 4 years. The Pensions Regulator can request these at any time.

If you are unsure about a specific record type, the safest approach is to keep it for 6 years from the end of the relevant tax year.

What happens if you do not keep payroll records

HMRC takes payroll record keeping seriously, and there are real consequences for employers who fall short. Understanding the risks can help you prioritise compliance before problems arise.

Financial penalties: HMRC can issue a penalty of up to £3,000 if you fail to keep adequate PAYE records. This applies even if no tax has actually been underpaid.

Estimated tax bills: If HMRC cannot verify your records, it may estimate what you owe. These estimates are often higher than the actual amount, and challenging them without supporting documents is difficult.

HMRC investigations: Poor record keeping can trigger a more detailed HMRC compliance check. These investigations are time-consuming and may uncover other issues that lead to further penalties.

Employee disputes: Without accurate records, resolving disagreements over pay, holiday entitlement or deductions becomes much harder. Employment tribunals expect employers to produce clear documentation. If you are hiring employees for the first time, setting up proper record keeping from day 1 is essential.

Reputational damage: Payroll errors erode trust with your team. Employees expect to be paid correctly and on time, and repeated mistakes can affect morale and retention.

Digital or paper payroll records

HMRC accepts payroll records in both paper and digital format, so you can choose whichever approach suits your business. However, most employers find that digital records offer significant practical benefits over paper filing systems.

Cloud-based payroll records are accessible from anywhere with an internet connection, making it easier to retrieve information when you need it. Digital storage also reduces the risk of loss from fire, flood or simple misplacement. Automatic backups mean your data is protected even if a device fails.

Payroll software goes further by automating tax and NIC calculations, generating payslips and submitting RTI reports directly to HMRC. This reduces the chance of manual errors and helps you meet filing deadlines. With Making Tax Digital expanding across more areas of tax compliance, keeping digital records also helps you prepare for future requirements.

Best practices for payroll record keeping

Following a few straightforward practices can help you stay compliant and avoid the stress of scrambling for records during an HMRC check.

Centralise your records: Store all payroll documents in 1 secure location rather than spreading them across spreadsheets, email folders and paper files. A single system of record makes retrieval faster and reduces the risk of gaps.

Use HMRC-recognised payroll software: Software that is recognised by HMRC handles tax calculations, generates required reports and submits RTI data directly. This removes much of the manual work and helps you avoid calculation errors. You can check HMRC's list of recognised products to find payroll software that meets submission standards.

Schedule regular audits: Set a quarterly or annual review to check that your records are complete and accurate. Catching errors early is far easier than correcting them after an HMRC enquiry.

Stay updated on regulation changes: UK payroll rules change regularly. New tax thresholds, NIC rates and reporting requirements come into effect each April. Subscribe to HMRC updates or use software that applies changes automatically.

Back up your data: If you use digital records, ensure they are backed up regularly. Cloud-based solutions typically handle this automatically, but if you use local software, set up a separate backup routine.

Train your staff: Anyone involved in payroll processing should understand what records to keep and for how long. Clear internal guidelines reduce errors and ensure consistency if responsibilities change.

Simplify your payroll record keeping with Xero

Cloud-based payroll software takes the manual effort out of record keeping. With features like automated pay calculations, digital payslip generation and direct RTI submissions to HMRC, you can maintain accurate records without the admin burden. Everything is stored securely in the cloud, so your records are organised, backed up and accessible whenever you need them. See how Xero can help you stay on top of payroll compliance and get one month free.

FAQs on payroll records

Here are answers to frequently asked questions about payroll records.

What payroll records must employers keep in the UK?

UK employers must keep records of all payments and deductions for each employee, including payslips, P45s, P60s, P11Ds, PAYE and NIC calculations, RTI submissions and pension contributions. HMRC provides a full checklist in its employer payroll guidance.

How long do you need to keep payroll records?

PAYE records must be kept for at least 3 years from the end of the tax year they relate to. National minimum wage records, holiday pay records and auto-enrolment pension records must be kept for 6 years.

What happens if you do not keep payroll records?

HMRC can issue a penalty of up to £3,000 for inadequate record keeping. It may also estimate your tax liability, which is often higher than the actual amount owed.

Can you keep payroll records digitally?

Yes, HMRC accepts digital payroll records. Cloud-based payroll software is a popular choice because it automates calculations, stores records securely and simplifies HMRC submissions.

Do payroll records include holiday pay information?

Yes, payroll records should include details of holiday entitlement, leave taken and holiday pay calculations. From 6 April 2026, the Employment Rights Act requires employers to retain these records for 6 years.