NHS practice payroll is quite complex due to the intersection of standard HMRC regulations. This complexity is increased further by the specific requirements of the NHS Pension Scheme.
The truth? NHS payroll compliance trips up a lot of practices.
Mistakes in these areas can lead to significant financial penalties. HMRC payroll errors can also lead to pension inaccuracies for staff and strained employee relations.
So let’s get into the common mistakes. The ones that come up again and again. And the ones that can quietly cost you a lot more than you’d expect!
What NHS Payroll Compliance Really Means
NHS payroll compliance means aligning payroll with HMRC requirements. That covers PAYE, National Insurance, pensions, statutory payments, and reporting. However, in 2026/27, payroll compliance obligations have become more detailed.
Now, NHS payroll compliance includes things like:
- Submitting RTI reports accurately and on time.
- Applying the correct National Minimum Wage (NMW) and National Living Wage (NLW) rates.
- Ensuring Statutory Sick Pay (SSP) is calculated correctly from the first qualifying day.
- Calculating holiday pay fairly, especially for irregular hours.
- Keeping payroll data secure under stricter reporting standards.
For NHS practices, payroll mistakes UK healthcare providers make can create problems in several areas.
Common NHS Payroll Compliance Mistakes in 2026/27
Mistake #1: Getting the Employment Status Wrong for Locums
Locum doctors and nurses keep the NHS running. However, the way locums are paid remains one of the highest-risk areas in NHS payroll compliance.
As the practice, you must provide a Status Determination Statement (SDS). This is for every locum who works through a limited company. Practices should never assume a locum automatically falls outside IR35 rules.
If the locum works regular shifts and follows your surgery’s specific protocols, HMRC may decide they are actually an employee for tax purposes. And if you pay them gross but HMRC decides they are “inside” IR35, the tax bill falls on you. Yes!
This is one of the most expensive payroll mistakes UK healthcare firms make.
Mistake #2: NHS Pension Scheme Contributions Calculated Incorrectly
Incorrect NHS pension calculations remain one of the most common NHS payroll compliance issues. The NHS Pension Scheme uses a tiered contribution structure. The percentage a staff member contributes changes depending on their pay band.
For 2026/27, employee contribution rates range from around 5.2% to 12.5% in England and Wales. These contribution rates actually depend on pensionable pay. And mistakes in this area happen in two ways:
- Either the wrong tier is applied, or
- Pensionable pay is calculated incorrectly.
Remember that employer contributions also need to match the NHS employer rate. Even small calculation errors can accumulate significantly over time. And while the total NHS employer contribution rate is 23.7%, individual practices are currently responsible for paying only 14.38%, with the remainder funded centrally.
Check Out: How to Handle Payroll for Healthcare Staff?
Mistake #3: Real Time Information (RTI) Submissions Filed Late or Incorrectly
Late or incorrect Full Payment Submissions (FPS) are one of the most common HMRC payroll errors. HMRC expects Real Time Information (RTI). RTI submissions must be filed every time employees are paid. If you are even one day late, the system flags it.
Payroll penalties UK start at £100 per month. And this is for small practices with 1 to 9 employees. If you have a larger practice with over 50 staff, the monthly fine jumps to £300.
If the errors are persistent, these fines add up fast. From April 2026, every late filing also adds one penalty point to your record. For monthly filers, once you reach 5 points, you are hit with an additional, automatic £200 for that miss and every further late submission thereafter.
Mistake #4: Incorrect Tax Codes Being Used
Well, yes, it sounds quite basic. But this is also a fact that incorrect tax codes are very common. And this usually happens when staff work multiple jobs. Or employees move between NHS employers. It can also happen when temporary workers join mid-year and P45 information arrives late.
Using emergency tax codes for too long is also a very common NHS payroll compliance issue. And while it’s the employee who ultimately bears the tax liability. It creates a headache for everyone. HMRC can and does hold employers responsible for systematic failures here.
Mistake #5 Statutory Pay Miscalculations
The rates change almost each April for the Statutory Sick Pay, Statutory Maternity Pay, and Statutory Paternity Pay. For 2026/27, SSP is £123.25 per week. But it is now legally capped at 80% of an employee’s average weekly earnings if that is lower.
NHS payroll teams often struggle with statutory payments. This is because healthcare work patterns vary so much.
Here, things that can count towards HMRC payroll errors are getting the qualifying period wrong. Or miscalculating average weekly earnings.
Payroll Penalties UK: What Are the Actual Risks?
People often underestimate how quickly payroll penalties UK can add up. Well, here’s a quick summary of what payroll penalties HMRC can apply:
| Type of Error | Potential Penalty |
| Late RTI submission | £100 to £400+ per month, depending on staff count |
| Failure to pay the correct PAYE | Interest + up to 100% penalty in serious cases |
| Incorrect employment status | Backdated PAYE, NI + interest |
| Failure to enrol in auto-enrolment | £400 fixed penalty + £50 to £10,000 per day |
Penalties may vary depending on the severity and duration of non-compliance. Make sure to address these issues proactively. Rather than waiting to be contacted.
How Often Do I Need to Check Tax Codes?
HMRC sends out P6 and P9 notices whenever an employee’s tax code changes. You should be checking for these every pay run. Using an old tax code can lead to employees underpaying tax. HMRC may request explanations if outdated tax codes continue to be used.
Check Out: How to Avoid HMRC Investigations as a Healthcare Professional
Do I Need to Pay Locums Through PAYE?
It depends on the locum’s employment status. If they are truly independent and work for many different practices on their own terms, they can be self-employed.
However, many locums now fall under the “off-payroll working” (IR35) rules. And if they do, then you must deduct tax and also National Insurance. Just like you do for your regular staff.
Can I Still Claim the Employment Allowance?
Yes, you can. For the 2026/27 tax year, the Employment Allowance remains at £10,500. This is a great way to reduce your employer’s National Insurance bill.
Just remember that if you are part of a larger group of practices or connected companies, only one of you can claim it.
The Bottom Line
NHS payroll compliance is no longer something practices can treat as a small admin task. Payroll regulations have become more detailed, and HMRC reporting requirements are stricter than ever. As a result, payroll mistakes UK healthcare employers make can become expensive surprisingly fast.
The good news is that most payroll mistakes UK healthcare settings are entirely avoidable. Regular reviews, proper payroll systems, accurate staff records, and specialist support can significantly improve compliance and reduce risk.
If you’re unsure about NHS payroll compliance, CruseBurke is here to assist.
From NHS pension charges to private practice expenses, there’s a lot that general accountants miss. See exactly what we can save you — get a quote and find out in minutes.
How CruseBurke Can Help
At CruseBurke, we have made it our mission to protect the finances of those who spend their lives protecting others. Our team of specialist healthcare accountants understands the complexities of healthcare finances.
If you need help with NHS payroll compliance or any accounting service, such as bookkeeping for healthcare, payroll for healthcare, or year-end accounts for healthcare, reach out to us today. We would love to discuss how we can make life easier for your healthcare clinic!
Disclaimer: The information about “NHS Payroll Compliance: What Are the Common Compliance Mistakes” is provided in this article including text and graphics. It does not intend to disregard any of the professional advice.
