Best payroll software for small businesses in the UK

Running your own payroll is a popular choice among small businesses in the UK, especially when taking on your first few employees.

However, it’s also important you get payroll right – and for that you’ll need payroll software. There’s a number of options available, some of which are cloud-based and others that run on your own computers. There are both free and paid-for payroll options available.

Here, we run through some of the best small business payroll software options in the UK, and look at some of the factors to consider when making a choice.

What should I look for in payroll software for small businesses?

When looking for payroll software, whether it’s paid-for or free, you need to make sure that it’s capable of reporting to HMRC in real-time. This is known as being RTI compliant. HMRC regularly checks payroll software to evaluate whether or not it’s RTI compliant, and it keeps a list of approved software programs.

Every business will have different requirements, but in general you’ll need payroll software that:

  • records employee details
  • calculates pay and deductions
  • calculates statutory pay
  • reports in real-time to HMRC
  • calculates how much you need to pay HMRC

Some payroll software packages have comparatively limited feature sets, and this is particularly common for free options. For example, basic payroll software might not enable you to produce payslips, deal with pension deductions and payments, or calculate payments across different periods (when you pay some employees monthly and others weekly).

6 of the best small business payroll software in the UK

Every business is different, and you should make sure you properly evaluate your options before making a decision on payroll software. Here are some of the most notable payroll software choices for small businesses in the UK, at different price points.

HMRC Basic PAYE Tools

This suite is developed by HMRC itself. It’s a good option if you’re on an extremely tight budget and only require the basics. Try here.

KashFlow Payroll

KashFlow allows you to carry out your payroll tasks in the cloud. The company makes a range of different accounting and payroll tools at different prices. There’s also a time-limited free option, as listed later in this article. Try here

Sage Payroll

Sage is one of the biggest players in the accounting and bookkeeping world. It’s RTI compliant, allows you to complete payslips and manage pension deductions, and claims to require no training to use. For businesses with up to five employees, it’s available for as little as £6 per month. Try here.

BrightPay

BrightPay is a prominent payroll software provider. They have a simple but attractive interface that will seem familiar if you’re used to software like Excel. The price is the same regardless of the number of employees you have. Try here.

FreeAgent

FreeAgent is a fully-fledged bookkeeping and accounting solution that also comes with a payroll add-on. It’s cloud-based, and also includes a mobile app which can be useful if you’re on the go.

Remember, though, that if you want to use FreeAgent’s payroll solution, you’ll need to move your accounting onto their platform too. Read more.

Xero Payroll

Xero is an extremely popular cloud-based accounting solution – you might have even seen their adverts on bus stops. Just like FreeAgent, they offer a payroll plug-in if you choose them as your accounting software provider.

Xero plans are available from £10 per month, but you’ll need to pay an extra £5 per month for payroll for up to five employees, and £1 per month for each additional employee over that number. Try here.

Is there free payroll software in the UK?

If you’re looking for free payroll software for your UK small business, there are a few options. HMRC has compiled a list of free software that it’s tested and recognised, all of which it says are suitable for businesses with up to 10 employees.

You should note, however, that some of these are feature-limited in their free versions. Others are free only for a limited time. As with paid payroll software, it’s important that you consider the specific requirements of your business before making a decision.

Free payroll software tested by HMRC includes some of the options listed above:

HMRC Basic PAYE Tools

HMRC’s own payroll software allows businesses to complete most basic payroll tasks, including calculating tax and National Insurance and reporting to HMRC. Try here.

KashFlow (time-limited free option)

KashFlow is available to try for free for two payment periods. Try here.

BrightPay Free

BrightPay offer a free licence for very small businesses with up to three employees. Apply for a free licence.

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