How to correct a payroll mistake in a previous tax year
Mistakes in the current tax year are easy. You put the right year-to-date figures on your next payroll run and HMRC's records catch up. A mistake in a year that has already closed is different. P60s have gone out, the employee's record for that year has been built from what you sent, and the fix depends on the date you find it.
Most of these turn up at a handover. A new bureau or a new finance manager reconciles the last year properly for the first time and finds a bonus that never reached a submission, or an employee on the wrong National Insurance letter since spring. None of it is unusual, and HMRC have a set route for each.
The date you find it decides the route
| When you find it | What GOV.UK says to send |
|---|---|
| In the same tax year | Update the year-to-date figures on your next regular Full Payment Submission (FPS) |
| After 5 April, up to 19 April | An additional FPS for the year just ended, with corrected year-to-date figures and ‘0’ in ‘Pay in this period’ |
| From 20 April onwards, for 2020 to 2021 or later | Another FPS for the year of the mistake, showing the correct year-to-date figures |
| A wrong Employer Payment Summary (EPS) in an earlier year | An EPS with the correct year-to-date figures for the tax year where the mistake was made |
If you learned payroll some time ago, you may be expecting an Earlier Year Update here. HMRC's PAYE Manual says the EYU stopped being a valid submission for 2020 to 2021 and every year after it, so the correction now goes on a further year-to-date FPS.
Wrong National Insurance letter
GOV.UK gives this one its own instruction for earlier years. Send an additional FPS with the correct category letter and the correct year-to-date National Insurance for that letter. If the wrong letter meant the employee paid too much or too little, their deductions have to be put right as well.
Then there's the money
The submission corrects the record. It doesn't settle who pays what, and HMRC's employer guide, CWG2, treats tax and National Insurance separately.
National Insurance taken short
As a general rule, the employer pays any underpayment of National Insurance that comes from an error. Where the mistake was made in good faith, you can claw back the employee's share from their later pay, within two limits. Each extra deduction can be no bigger than the employee's normal contribution on that payment. And you can only recover during the rest of the tax year the error happened in and the whole of the year after. Anything still outstanding then, or when the employee leaves, stays with you.
Tax taken short
For under-deducted PAYE found after the year end, CWG2 says you can ask HMRC for a direction that the employee pays it. HMRC issue one where you can show you took reasonable care to operate PAYE and the error was made in good faith.
Too much taken
If you over-deducted National Insurance and the correction can't go through payroll reporting, you write to HMRC's National Insurance Contributions and Employer Office with a full explanation, revised figures for each employee affected, and the reason you couldn't amend it through RTI. HMRC refund the employee's share directly to them. The employee then gets a letter from you showing the amendment and a new P60 marked ‘Replacement’.
Will there be a penalty? GOV.UK's line is that you'll only be charged a penalty for a mistake if you didn't take reasonable care or did it deliberately. CWG2 adds that amended information means the original was incomplete or inaccurate, so a correction is never a formality. Keep a note of how the mistake happened and when you found it.
An illustration
A saddlery business in Asunción runs a small UK subsidiary in Walsall. In October 2026 a new payroll provider takes over and finds that a sales manager's February 2026 commission was paid outside the payroll run, with no tax or National Insurance taken, and never reported. It belongs to the 2025 to 2026 tax year, it's well past 19 April, and that year is after 2020 to 2021, so the fix is another FPS for 2025 to 2026 carrying the corrected year-to-date pay, tax and National Insurance.
The error was made in good faith, in 2025 to 2026, so the subsidiary can recover the employee's missing National Insurance from her pay until 5 April 2027, a little at a time, within the cap. The unpaid tax is a different conversation. The subsidiary asks HMRC for a direction and keeps the working that shows how the commission was missed.
If you're the new provider in that story, our mid-year handover checklist is where this sort of find usually starts.
How far back
CWG2 says corrections to the original FPS information can be made for up to 6 years after the original FPS or EPS was filed. That's a long tail, which is one more reason to reconcile each year properly at the year end rather than leave the next person to find it.
Found something in last year's payroll?
We run UK payrolls, including ones taken over part way through a year. Tell us what you've found and we'll look at it with you.
Ask us about itCommon questions
Do I still send an Earlier Year Update to correct a previous year?
Not for 2020 to 2021 or any later year. HMRC's PAYE Manual says the Earlier Year Update stopped being a valid submission for those years, and employers correct them by sending a further Full Payment Submission with the right year-to-date figures.
How far back can a payroll error be corrected?
HMRC's employer guide CWG2 says you can submit corrections to the original FPS information for up to 6 years after you filed the original FPS or EPS.
Will HMRC charge a penalty for correcting a mistake?
GOV.UK says you will only be charged a penalty for a mistake if you did not take reasonable care or did it deliberately. Paying anything that was underpaid is a separate question from the penalty.
Read next
- What is RTI? FPS and EPS explained
- HMRC says you owe PAYE that you have already paid
- PAYE penalty calculator
- UK payroll year end: P60, P11D and the final FPS
- Taking on a payroll client mid-year
General information for employers, not tax or legal advice. It reflects GOV.UK guidance, HMRC's PAYE Manual and the employer guide CWG2 as read on 29 October 2026, which can change. Please check your own position before acting.