HMRC-Recognised Payroll Software: What You Need to Know

Every UK employer running PAYE needs payroll software that HMRC recognises for Real Time Information (RTI) submissions. But "recognised" is not the same as "approved," "recommended" or "certified," and the difference matters more than most guides let on. HMRC recognition tells you that software can submit your payroll data in the correct format. It tells you nothing about whether the software is accurate, well-supported or right for your business.

This guide explains what HMRC recognition actually means, what it does and does not guarantee, whether HMRC's free tools are enough for your situation, and how to check that your software qualifies.

At a glance

Every UK employer filing PAYE needs HMRC-recognised software to submit payroll data to HMRC on or before each payday. Without it, you cannot meet your Real Time Information reporting obligations. > What recognition means
"Recognised" is not the same as "approved" or "recommended." HMRC tests that software can connect and submit data in the correct format, not that it is accurate, reliable or well-supported. > What recognition does and doesn't guarantee
HMRC provides free payroll tools for employers with fewer than 10 employees. Basic PAYE Tools handles core payroll calculations and RTI submissions, but does not cover auto-enrolment or scale beyond nine employees. > HMRC's free tools
HMRC publishes a searchable list of all recognised software on GOV.UK, updated regularly. Check it before committing to any provider. > How to check
Recognition is the compliance floor, not the quality ceiling. Auto-enrolment, reporting, employee self-service and integration all matter for your business but are not part of the HMRC test. > Beyond recognition
Most employers with 10 or more employees will need commercial software, and many smaller employers will too, once auto-enrolment complexity or time pressures come into play. > Free vs commercial

What HMRC-recognised payroll software means

HMRC-recognised payroll software is software that has been tested and published on HMRC's official list for reporting PAYE information online. In practical terms, it means the software can submit your Real Time Information (RTI) returns electronically to HMRC in the correct format.

What HMRC actually tests

The recognition process is more limited than most people expect. Software developers build their product to meet HMRC's RTI technical specifications, then apply to HMRC's Software Developer Support Team for recognition. HMRC reviews the application, which typically takes around six weeks, and publishes successful products on the recognised software list on GOV.UK.

What the test confirms is that the software can connect to HMRC's systems and submit a Full Payment Submission (FPS) and an Employer Payment Summary (EPS) in the required data format. It does not test whether the software calculates your employees' pay correctly, whether it handles edge cases, or whether it will be reliably maintained.

This is an important distinction. Recognition is a technical connectivity test, not a quality assessment.

The legal basis

Since April 2013, UK employers have been required to report payroll information to HMRC in real time under the RTI system. This means submitting an FPS on or before each payday, containing employee-level details of pay, tax, National Insurance and other deductions. If you do not pay any employees in a given period, you submit an EPS instead.

You need HMRC-recognised software to make these submissions. Late or missing returns can trigger penalties that scale with the size of your PAYE scheme, starting at £100 per tax month for the smallest employers. For the full picture on filing deadlines, corrections and the penalty regime, see our guide to RTI submissions.

A small number of employers can file on paper instead. The exemptions are narrow: practising members of religious societies whose beliefs are incompatible with electronic communication, care and support employers meeting specific conditions, and employers granted digital exclusion on grounds such as disability, age or lack of a reliable internet connection. You have to apply in writing and HMRC has to agree. You cannot choose paper filing simply because you prefer it. The conditions are set out in HMRC's guidance on exemption from online payroll reporting.

In short: unless you hold one of those exemptions, if you employ anyone through PAYE you need HMRC-recognised payroll software.

HMRC Basic PAYE Tools: what you get for free

HMRC provides its own payroll software, called Basic PAYE Tools (BPT), free of charge. It is designed for employers with fewer than 10 employees and covers the core payroll tasks most small employers need.

What Basic PAYE Tools does

BPT is a desktop application available for Windows, macOS and Linux. You download it from GOV.UK and install it on your computer. Once set up, it allows you to:

Record employee details (starters, leavers, personal information)
Calculate tax, National Insurance contributions, and student or postgraduate loan deductions each payday
Generate and submit Full Payment Submissions (FPS) and Employer Payment Summaries (EPS) to HMRC in real time
Generate payslips
Produce an Employer Payment Record showing how much you owe HMRC
Check new employees' National Insurance numbers via a verification request

HMRC updates BPT at the start of each tax year with the latest rates and thresholds, and the software checks for updates automatically once it is installed.

One practical quirk worth knowing: BPT cannot print directly to a printer. Payslips, P45s and P60s have to be saved as a PDF first, then printed or emailed from there. If you plan to email payslips to your employees, you need their agreement before you do so.

Where Basic PAYE Tools falls short

BPT is designed for simplicity, and that means deliberate limitations.

What BPT handles	What BPT does not handle
Tax, NI, student loan calculations	Auto-enrolment (assessment, communications, pension submissions)
FPS and EPS submission to HMRC	BACS payment processing
Payslip generation	Employee self-service
Employer Payment Records	Integration with accounting, HR or pension systems
Starter and leaver processing	Complex pay patterns across multiple frequencies
NI number verification	Bureau or multi-employer payroll

The auto-enrolment gap deserves particular attention. Automatic enrolment into a workplace pension is a legal requirement for most UK employers. Eligible employees must be enrolled, contributions must be calculated and deducted, and information must be submitted to your pension provider. Basic PAYE Tools does not handle any of these tasks. If you use BPT, you need a completely separate process to meet your auto-enrolment duties, which typically means manual assessment, manual communications and manual submission to your pension provider.

BPT is also a desktop application with no cloud access, no mobile capability and no way to share access across a team. If your computer fails, you need a local backup to recover your data.

Who Basic PAYE Tools suits (and who it doesn't)

BPT works well if you have a handful of salaried employees on a single pay frequency, your payroll is straightforward, and you are comfortable managing auto-enrolment separately. A sole director paying themselves a salary, or a small business with three or four employees on monthly pay, can run payroll effectively on BPT.

BPT starts to strain if you are approaching the nine-employee limit, running multiple pay frequencies, dealing with regular starters and leavers, or finding the manual auto-enrolment process unsustainable. At that point, the time you spend on workarounds often outweighs the cost of commercial software.

It is also worth knowing that BPT is not the only free option. Several commercial payroll providers offer free tiers for employers with fewer than 10 employees, and these often include features BPT lacks, such as cloud access, auto-enrolment support and basic reporting. These are listed alongside BPT in the free section of the HMRC recognised software list.

What HMRC recognition does and doesn't guarantee

This is where most guides on this topic fall short. HMRC recognition is treated as a quality mark, and it is not. Understanding the distinction will help you make better decisions about your payroll software.

What recognition covers

Connectivity. The software can establish a connection to HMRC's systems and transmit data successfully.
Data format. FPS and EPS submissions are structured in the format HMRC's technical specifications require.
Required fields. The software handles the data fields HMRC needs to receive.

That is the full extent of it. The list is short because the test is narrow.

What recognition does not cover

Calculation accuracy. Whether the gross-to-net maths behind your submission is correct.
Support quality. Whether you can reach anyone when something goes wrong.
Reliability. Uptime, performance at month end, or business continuity if the provider fails.
Data security. Anything beyond the requirements of the submission itself.
Usability. Whether the software is workable for the person who has to run payroll on it.
Integration. Whether it connects to your accounting, HR or pension systems.
Feature completeness. Auto-enrolment, reporting, employee self-service and everything else your business may need.
Ongoing maintenance. Whether the product will be updated reliably, or supported in five years.

In practice, this means two things. First, being on the recognised list is a necessary baseline. If your software is not on the list, you cannot use it for RTI submissions. Second, being on the list alone tells you very little about whether the software will serve your business well. Two products can both be HMRC-recognised while differing enormously in accuracy, reliability, features and support.

When you are evaluating payroll software, treat recognition as the entry requirement, not the deciding factor. Check the list to confirm a product qualifies, then assess everything else that matters to your business on its own merits.

Important: HMRC states clearly on its recognised software page that it cannot recommend one product or service over another, and that it is not responsible for any problems you have with software you have bought. Recognition means the software can file your returns. It does not mean HMRC has checked the calculations, reviewed the code, or assessed whether the product is fit for purpose.

How to check if software is HMRC recognised

Finding the list

HMRC publishes its complete list of recognised payroll software on GOV.UK. The list is split into two sections: free software (for employers with fewer than 10 employees) and paid-for software.

How the list is organised

Each entry shows the supplier's name and the product name. The list is alphabetical by supplier and does not include feature comparisons, pricing or ratings. It tells you whether a product is recognised; it does not help you compare products.

Checking a specific product

If a payroll provider tells you their software is HMRC-recognised, you can confirm it yourself in under a minute. Open the list and search the page for the supplier or product name. If it appears, the software has been through HMRC's recognition process.

If you cannot find what you are looking for, ask the provider directly which of their products appears on the list and under what name. Suppliers sometimes appear under a parent company name, a legacy brand, or the name of a specific product rather than the one used in their marketing.

How often the list is updated

HMRC updates the list regularly, typically several times a month, as new products are recognised or existing entries are amended. The change history at the bottom of the page shows recent updates with dates.

How software gets added

Software developers apply for recognition by email to HMRC's Software Developer Support Team after completing development and testing against HMRC's RTI technical specifications. HMRC reviews the application and aims to respond within six weeks. You can find more detail on this process in HMRC's guidance for payroll software developers.

Beyond recognition: what else to look for

Once you have confirmed that a product is HMRC-recognised, the real evaluation begins. These are the capabilities that recognition does not test but that your business will depend on.

Compliance and payment features

Auto-enrolment capability. If you have employees who meet the qualifying criteria (aged 22 to State Pension age, earning above the £10,000 trigger), you must automatically enrol them into a qualifying workplace pension scheme. At least 8% of qualifying earnings must be contributed, with a minimum 3% from the employer. Your payroll software ideally handles assessment, communications, contribution calculations and submission to your pension provider as part of the payroll run. If it does not, you need a separate process, and that is where errors creep in. The Pensions Regulator sets out the full employer duties.

BACS payment processing. The ability to generate BACS files and make salary payments directly from the payroll system removes a manual step and reduces the risk of payment errors.

Data security. Payroll data includes some of the most sensitive personal information your business holds: names, addresses, dates of birth, National Insurance numbers, bank details, salaries. Look for providers with recognised certifications such as ISO 27001 and compliance with UK GDPR requirements. The ICO publishes guidance on your obligations as a data controller.

Operational and reporting features

Employee self-service. Giving employees access to their payslips, P60s and personal details online reduces the volume of routine queries your payroll team handles.

Reporting. Beyond the statutory submissions, you will want management reports: cost centre breakdowns, variance analysis, headcount reporting, pension contribution summaries. The depth of reporting varies significantly between products.

Integration. Your payroll system does not operate in isolation. It connects to your accounting software, your HR system, your time and attendance records and your pension provider. How well those connections work, and whether they are automated or manual, makes a material difference to your workload and accuracy.

Cloud vs desktop. Cloud-based payroll offers access from anywhere, automatic updates and built-in backup. Desktop software can work offline but requires local maintenance and backup routines.

This is a brief overview rather than a full evaluation framework. For more detail on what to look for, see our guide to the benefits and features of cloud-based payroll software, our guide to payroll software for small businesses, and our guide to choosing payroll software.

Free tools vs commercial software: when to make the move

When HMRC's free tools are genuinely enough

If all of the following apply, Basic PAYE Tools or another free HMRC-recognised option may be all you need:

You have fewer than 10 employees
Your employees are on a single pay frequency (typically monthly)
Your payroll is straightforward: salaried, no complex overtime, no CIS
You can manage auto-enrolment separately (or your employees do not yet trigger auto-enrolment duties)
You are comfortable with a desktop application and have a backup routine

This is not a compromise. For the right employer, the free tools do the job. If you have three salaried employees on monthly pay, BPT will calculate their deductions, submit your RTI returns and produce payslips without costing you anything.

When you need commercial software

The triggers tend to cluster rather than arrive one at a time:

Headcount approaching or exceeding 10 employees. BPT's ceiling is hard.
Auto-enrolment complexity. The manual workaround becomes untenable as headcount grows, employees join and leave, and contribution rates need adjusting.
Multiple pay frequencies. Weekly, fortnightly, monthly and four-weekly cycles running in parallel need software designed for it.
Time cost. If you are spending hours on workarounds that commercial software would handle automatically, the cost comparison has already shifted.
Cloud access and team working. When more than one person needs to process or review payroll, desktop software creates bottlenecks.
Integration needs. If you are manually transferring data between payroll, accounting and HR, you are adding time and risk that an integrated system eliminates.

What commercial software adds

The practical differences between the free tools and a paid product cluster into a few areas.

Free HMRC tools	Typical commercial payroll software
Core payroll calculations	Core payroll calculations
RTI submission	RTI submission
Payslip generation	Payslip generation and distribution
Desktop only	Cloud access from any device
No auto-enrolment	Integrated auto-enrolment
No BACS processing	BACS file generation
No employee self-service	Employee self-service portal
Basic reporting	Management and compliance reporting
No integration	API connections to accounting, HR, pensions
Limited to 9 employees	Scales with your business
HMRC helplines, webinars and online guidance	Dedicated product support and account management

Cost context: for a small employer, entry-level commercial payroll software is generally a low-hundreds-of-pounds annual cost, varying with headcount and the features included. Several providers offer free tiers for very small businesses that go beyond what BPT does. As headcount grows, pricing usually shifts to a per-employee-per-month (PEPM) model. For a detailed breakdown of what payroll costs look like at different scales, see our guide to payroll outsourcing costs.

The accountant option. If you would rather not run payroll yourself, many accountants and bookkeepers offer payroll as part of their service. They will use HMRC-recognised software on your behalf. This is a valid route, especially for very small employers. You can explore the options in more detail in our guide to payroll services for small businesses.

Changing payroll software

You can switch payroll software at any point, including mid-year. You do not need to wait for the start of a new tax year, though timing the switch to align with a pay period boundary makes the transition smoother.

If your new software does not carry forward the same employee Payroll IDs, you will need to mark "Yes" in the "Payroll ID changed indicator" field in your next Full Payment Submission. This tells HMRC that the employee record is continuing, not duplicating. Missing this step can cause your PAYE bill to be calculated incorrectly.

Key considerations when switching: confirm your new software is HMRC-recognised before you commit; export your year-to-date data from the old system; consider running both systems in parallel for one pay period to validate the results; and keep your old records for at least three years after the end of the tax year they relate to.

For a full guide to changing providers, including how to manage the transition without disrupting your payroll, see our guide to switching payroll provider.

Common misconceptions about HMRC payroll software

Misconception: "HMRC recognition means the software is accurate." It does not. Recognition confirms that the software can submit data to HMRC in the correct format. Whether the gross-to-net calculations behind that submission are correct is a separate matter entirely. You are responsible for the accuracy of the information you submit, regardless of which software you use.

Misconception: "HMRC approves or recommends specific payroll software." It does neither. HMRC is explicit that it cannot recommend one product over another. The recognised list is a register of products that have passed a connectivity test. It is not a ranking, a recommendation or an endorsement.

Misconception: "All payroll software is HMRC recognised." It is not. Software must go through a formal recognition process, and HMRC maintains a specific list of products that have passed. If a product is not on the list, it has not been recognised. Always check before committing.

Misconception: "The free tools are not good enough for a real business." That depends on your business. HMRC Basic PAYE Tools and several free commercial alternatives handle core payroll tasks competently for small employers. The limitation is not quality; it is scope. Free tools are designed for straightforward payroll with a small number of employees. If that describes your situation, they work.

Misconception: "If my accountant handles payroll, I don't need to worry about HMRC recognition." Your accountant still needs HMRC-recognised software to file your RTI submissions. The obligation sits with you as the employer, even when you delegate the task. It is worth confirming that your accountant uses recognised software and understanding what happens if they stop providing the service.

Why SD Worx

Our payroll software is HMRC-recognised and appears on the GOV.UK list. But for us, recognition is the starting point, not the standard we measure ourselves against.

Our payroll teams are CIPP-certified, and we hold ISO 27001 certification alongside ISAE 3000 and ISAE 3402 Type II assurance, covering information security, internal controls and independent verification of those controls. These go well beyond what HMRC recognition requires.

We also invest in staying ahead of legislative change. SD Worx representatives sit on UK Government consultation panels including the Rep Body Group and the Employer Payroll Group, and we are active in BCS (PSG), IReeN and the CIPP. Our UK Compliance Director, Simon Parsons, is a recognised authority on UK payroll legislation and fronts our monthly Payroll Question Time webinar, a free resource for anyone who needs to keep pace with HMRC changes.

In our experience, the employers who run into compliance trouble are rarely using the wrong software. More often they are using perfectly capable software without the expertise around it to catch problems early. That is where we focus: 99.97% payroll accuracy across more than 6 million payslips a month, backed by 80 years of payroll expertise and 90,000 customers worldwide.

Frequently asked questions

What does HMRC-recognised payroll software mean?

HMRC-recognised payroll software is software that has passed HMRC's technical test for submitting PAYE Real Time Information (RTI) returns electronically. It means the software can connect to HMRC's systems and submit Full Payment Submissions (FPS) and Employer Payment Summaries (EPS) in the required format. It does not mean HMRC has assessed the software's accuracy, features or quality.

Is HMRC Basic PAYE Tools free?

Yes. Basic PAYE Tools is free payroll software provided by HMRC. You can download it from GOV.UK for Windows, macOS or Linux. It is designed for employers with fewer than 10 employees.

How many employees can HMRC Basic PAYE Tools handle?

Basic PAYE Tools is designed for employers with fewer than 10 employees. If you reach 10 or more, you will need to move to commercial payroll software. Several HMRC-recognised commercial products offer free tiers for small employers if cost is a concern.

How do I check if my payroll software is HMRC recognised?

HMRC publishes a list of recognised payroll software on GOV.UK, split into free and paid-for sections. Search the page for your software provider or product name. The list is updated regularly, so it reflects the current position rather than a historic one.

Do I need HMRC-recognised software to run payroll in the UK?

If you employ anyone through PAYE, you must submit Real Time Information returns to HMRC, and you need HMRC-recognised software to do so. A small number of employers qualify for an exemption that allows paper filing, but these are narrow, have to be applied for in writing, and are granted at HMRC's discretion.

What's the difference between HMRC-recognised and HMRC-approved payroll software?

There is no practical difference, because "HMRC-approved" is not a real category. HMRC uses the term "recognised" and is explicit that it does not approve, endorse or recommend any product. "Approved" and "certified" are common but inaccurate shorthand you will see used in marketing.

Can I use HMRC Basic PAYE Tools for auto-enrolment?

No. Basic PAYE Tools does not handle any auto-enrolment tasks: it cannot assess employee eligibility, issue statutory communications, calculate pension contributions or submit information to your pension provider. If you use BPT, you need a completely separate process to meet your auto-enrolment duties. Most commercial payroll software integrates auto-enrolment into the payroll workflow.

Looking for payroll software that does more than tick the HMRC box?

Recognition gets you compliant. Everything after that is down to the software you choose and the people behind it. If you would like to talk through what your payroll actually needs, get in touch with our team.

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