Payroll records explained – what data to keep, how to store it, and how long to keep records

Last checked and updated on 15 September 2022

Maintaining accurate and up-to-date payroll records is a crucial part of running a successful business.

Not only do they help you keep track of your employees’ wages and salaries, but they can also provide proof of your payments in the event of an inspection or audit.

In this article, we explain what payroll records you need to keep, how to store them, and for how long.

We also provide some tips on how to make the process of keeping payroll records as easy as possible.

What are payroll records?

Payroll records in the UK are a set of documents that outline an employee’s pay and deductions. They also include information such as the employee’s name, address, national insurance number, and bank account details. The payroll records are used to calculate how much tax and National Insurance an employee owes each month.

What is included in a payroll record?

A payroll record includes the following information:

  • Employee name
  • Employee address
  • National insurance number
  • Bank account details
  • Payroll period start and end dates
  • Gross pay
  • Taxable income
  • Tax due
  • National Insurance contribution due
  • Pension contributions, if any
  • Other

How long to keep payroll records in the UK?

If you are a limited company, you should keep your records for at least six years from the date you file your Company Tax Return. This is to ensure that you have enough information to deal with any enquiries from HMRC about your company’s tax affairs.

If you are a freelancer or contractor, you may need to keep your records for longer than six years. This is because HMRC can ask you to provide evidence of your income and expenses for up to seven years after the end of the tax year in which they were incurred.

If you are self-employed, you may also need to keep your records for longer than six years. This is because HMRC can ask you to provide evidence of your income and expenses for up to nine years after the end of the tax year in which they were incurred.

What payroll records do I need to keep?

You should keep records of:

  • Your employees’ names, addresses, national insurance numbers and dates of birth
  • The amount of income tax and National Insurance you have deducted from your employees’ pay
  • The total amount of wages you have paid to your employees
  • Details of any benefits or expenses you have paid to your employees
  • Your employees’ start and end dates of employment
  • The date you paid your employees their final wage payment.

You should also keep copies of your employees’ payslips and P45s (or P60s if they are still working for you).

What payroll records might HMRC ask to see?

HMRC may ask to see records of:

  • Your employees’ start and end dates of employment
  • The date you paid your employees their final wage payment
  • The amount of income tax and National Insurance you have deducted from your employees’ pay
  • Details of any benefits or expenses you have paid to your employees.
  • If you are self-employed, HMRC may also ask to see records of:
    • Your income and expenditure
    • Your business bank statements.

How can I keep my payroll records?

You can keep your payroll records in a number of different ways, including:

  • A paper-based system – this is the traditional way to keep records, and involves writing down all the information in a ledger
  • An electronic system – this involves using software to record your payroll data, and can be either on your computer or in the cloud
  • A manual system – this is where you use a spreadsheet to track your payroll information.

How often should I update my payroll records?

You should update your payroll records at least once a week. This will ensure that you have accurate information to hand if HMRC ever asks to see them.

If you use an electronic system, you can automate this process by setting up the payroll software to automatically update your records each week. If you use a paper-based system, you will need to update the information manually.

If you are self-employed, you may need to update your records more often than once a week, as your income and expenditure can change more quickly.

Who should have access to payroll records?

Only those employees who need access to the payroll records should be given access to them. This includes those who are responsible for processing payroll and those who need to see the information in order to ensure compliance with the GDPR.

It is important to keep your payroll records secure, and to only share them with those who need to see them. You should also have a process in place for dealing with data breaches.

What are the GDPR concerns?

The General Data Protection Regulation (GDPR) came into effect on May 25, 2018. This regulation protects the personal data of EU citizens, and applies to organisations both inside and outside the EU.

Organisations that process payroll data must comply with the GDPR, which means ensuring that they have adequate security measures in place to protect this data. They must also have a process in place for dealing with data breaches, and must be able to demonstrate that they have taken all necessary steps to protect their employees’ data.

If your organisation does not comply with the GDPR, you could face heavy fines.

What are the penalties for non-compliance?

Organisations that do not comply with the GDPR can be fined up to 4% of their global annual revenue or €20 million (whichever is greater). This is the maximum fine that can be imposed, and it will be assessed on a case-by-case basis.

However, organisations that have not complied with previous data protection regulations may be subject to a higher fine.

What should I do if I am not sure how to comply with the GDPR?

If you are not sure how to comply with the GDPR, you should seek advice from a data protection specialist. They will be able to help you put in place the necessary security measures and processes to protect your employees.

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Important – The information provided in our articles is intended to be for general purpose use only, and not advice for you or your business. We strive to publish accurate information, but encourage you to fact-check and seek expert guidance. We recommend that you always speak to a qualified professional to get advice about how to operate your business under your specific requirements and circumstances.