Best payroll software for small businesses in the UK

Processing payroll is probably the least fun activity when running a small company, however, processing it incorrectly is certainly one of the fastest ways to experience problems with HMRC, cause your employees to lose trust in you, or receive an unexpected fine.

The positive aspect is that payroll software will take care of the majority of the complications involved in the process, by doing the tax calculation, RTI submission, as well as the pension auto-enrolment management, so that you can concentrate on running your own business.

We’ve reviewed seven of the most popular payroll software solutions available to small companies in the UK; their costs, features, ease of use, and which one is suited for each. Whether you are just paying your first employee, or if you have a team of 50+ employees, we have options for all.

Best payroll software for small businesses

1. Sage Payroll
2. Employment Hero
3. Xero Payroll
4. QuickBooks Payroll
5. BrightPay
6. FreeAgent
7. HMRC Basic PAYE Tools

Our top picks at a glance

Here’s a quick summary of our recommendations before we go into detail on each one:

All prices exclude VAT. Pricing verified February 2026 — always check the provider’s website for the latest rates.

What does payroll software really do?

In order to evaluate the options available before purchasing a payroll software program, it is useful to have an understanding of what good payroll software can accomplish on your behalf. Running payroll in the UK, as we all know, is about more than just simply dividing an individual’s wage by twelve, then hitting the “send” button. Each time you process a pay run there are many things that happen automatically; including: Gross pay calculation, Income Tax deductions under PAYE, Calculation of the employees and employers National Insurance Contributions and submission of a full payment submission (FPS) to HMRC.

The normal pay run is just the start; you will also have to deal with statutorily required payments such as Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Shared Parental Leave (SPL). Additionally you will be dealing with end of year matters; producing a P60 for each employee and a P11D for any taxable benefits-in-kind. Any reputable payroll software package will automate all of these items for you and update as the legislation changes; it will also keep an auditable record that you can refer to if HMRC at some point ask to see your records.

What to look for in payroll software for small businesses

With dozens of options on the market, it’s easy to get overwhelmed. Here are the factors that matter most for a small UK business:

• HMRC recognition: Only use software that appears on HMRC’s recognised payroll software list. This is your assurance that the tool meets HMRC’s technical requirements for RTI submissions.
• Auto-enrolment support: Since 2012, virtually all UK employers must automatically enrol eligible employees into a workplace pension and make contributions. Your payroll software should manage assessments, contributions, and submissions to providers like NEST, The People’s Pension, or Smart Pension.
• Ease of use: If you’re not a payroll professional, you need software with a clean interface and clear guidance. Some products are designed for accountants; others are built for business owners who just want to get payroll done.
• Integration with accounting software: If you use Xero, QuickBooks, or Sage for accounting, using the same provider’s payroll — or one that integrates cleanly — saves significant time reconciling payroll costs in your books.
• Pricing model: Payroll software pricing varies enormously. Some charge a flat monthly fee, others charge per employee, and some bundle payroll with accounting. Always calculate your actual monthly cost based on your employee count.
• Employee self-service: The ability for employees to view their payslips, request leave, and update personal details without emailing you saves time on both sides.
• Support quality: Payroll errors can be costly and stressful. Check what support is included — phone, live chat, or just a help centre.

1. Sage Payroll – Best for growing teams

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Best for: Small businesses with 10–150 employees who want a trusted UK brand with integrated HR.

Sage is arguably the best-known name in UK business software, and its cloud payroll product is a strong choice for small businesses that are past the micro-business stage and starting to grow. The platform is built specifically for the UK market, with HMRC recognition, full RTI functionality, auto-enrolment, and automatic updates whenever legislation changes — which is particularly important as the Employment Rights Act 2026 rolls out over the coming months.

Pricing (excl. VAT)

• Essentials: £20/month for up to 10 employees, then £1.30 per additional employee per month
• Standard: £40/month for up to 10 employees, then £3.30 per additional employee per month
• Premium: £60/month for up to 10 employees, then £5.30 per additional employee per month

Sage regularly offers introductory discounts (90% off for 3 months at time of writing) for new customers, and all plans support up to 150 employees. Payroll can also be added to a Sage Accounting subscription, which makes it a compelling all-in-one option if you’re already on the Sage ecosystem.

Key features

• HMRC-recognised, fully RTI-compliant
• Auto-enrolment and pension management
• P45, P60, and P11D generation
• Employee self-service portal and mobile app (Standard and Premium)
• Time tracking (Standard and Premium)
• HR features including leave management and employee onboarding (Premium)
• 24/7 digital support across all plans, webchat 7 days a week
• Integration with Sage Accounting for seamless bookkeeping

Our verdict:

Sage Payroll is our top pick for small businesses with a growing headcount who want a reliable, well-supported UK-built product. The Essentials plan is sufficient for most businesses up to around 15 employees; the Standard plan is worth the upgrade once you want time tracking and employee self-service.

2. QuickBooks Payroll – Best for QuickBooks accounting users

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Best for: Small businesses already using QuickBooks Online who want payroll in the same platform.

QuickBooks Payroll is an add-on to QuickBooks Online (available on all plans except Sole Trader), and if you’re already in the QuickBooks ecosystem, it’s hard to beat for simplicity and value. The two-tier payroll system — Core and Advanced — is straightforward, and the deep integration with QuickBooks accounting means your payroll costs flow automatically into your financial reports without manual journal entries.

That said, if you don’t already use QuickBooks for accounting, you’ll need to take on a QuickBooks Online subscription (from £16/month) on top of the payroll cost, which means it may not be the cheapest standalone payroll option.

Pricing (excl. VAT)

• Core Payroll: £5/month + £1.30/employee/month (add-on to QuickBooks Online, from £16/month)
• Advanced Payroll: £10/month + £1.30/employee/month

For a business with 5 employees, Core Payroll costs around £11.50/month on top of your QuickBooks subscription — making it one of the more affordable options once you factor in the combined accounting and payroll package.

Key features

• RTI submissions and PAYE calculations
• Auto-enrolment with multiple pension provider integrations (NEST, The People’s Pension, Smart Pension, Aviva, NOW:Pensions — Advanced plan)
• P45, P60, P11D generation
• Employee payslip portal
• Holiday pay and statutory payments (SSP, SMP, SPP)
• Direct integration with QuickBooks accounting — no manual posting
• Mobile app for both employers and employees
• UK-based support 7 days a week by phone and live chat

Our verdict:

QuickBooks Payroll makes excellent sense if you’re already using QuickBooks Online. It’s affordable, easy to use, and the accounting integration is genuinely seamless. If you’re not a QuickBooks user, you’re better off looking at standalone options like BrightPay or Sage.

3. Xero Payroll – Best for Xero accounting users

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Best for: Small businesses using Xero accounting who want payroll built into the same subscription.

Xero redesigned its UK plans in late 2024, and payroll is now bundled into three of its four accounting tiers — Grow, Comprehensive, and Ultimate. This means if you’re already on a Xero accounting plan, you can run payroll for your employees at no additional cost per employee (up to the plan limits). It’s a different pricing logic to most payroll software, and it makes Xero very good value for businesses that want accounting and payroll under one roof.

The Grow plan (£37/month) includes payroll for one person — most useful for a sole director-employee setup. The Comprehensive plan (£47/month) covers payroll for up to 5 employees, and the Ultimate plan (£59/month) covers up to 10, with additional employees chargeable at £1.50/month (or £1/month on Ultimate). Xero payroll is purpose-built for UK businesses with up to 50 employees, and the company recommends switching to a dedicated payroll provider beyond that threshold.

Pricing (excl. VAT)

• Grow: £37/month — payroll for 1 person included
• Comprehensive: £47/month — payroll for up to 5 people included
• Ultimate: £59/month — payroll for up to 10 people included; £1/month each additional employee

All plans allow adding further employees at £1.50/month (or £1 on Ultimate). The Ignite plan (£16/month) does not include payroll.

Key features

• Full RTI submissions and HMRC-recognised payroll
• Auto-enrolment and pension contributions management
• P45, P60, and payslip management
• Employee self-service app — employees can view payslips and request leave
• Integrated with Xero accounting — payroll journals post automatically
• CIS (Construction Industry Scheme) support
• MTD for Income Tax included at no extra cost on all plans from April 2026
• 30-day free trial available

Our verdict:

Xero Payroll is excellent value if you’re already on a Xero accounting plan at the Comprehensive or Ultimate tier. The bundled payroll removes the need for a separate subscription. If you’re not already a Xero customer, the cost of getting onto a Xero plan just for payroll may not be competitive.

4. BrightPay – Best for cost-conscious small businesses

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Best for: Small businesses that want powerful UK payroll features at a lower price point, or accountants managing payroll for multiple clients.

BrightPay is something of a hidden gem in the UK small business payroll market. While less well-known than Sage or Xero, it has an outstanding reputation among small businesses and accountants alike, and is frequently praised for its generous feature set relative to its price. The product was primarily desktop-based for many years, but from the 2026/27 tax year BrightPay will be exclusively cloud-based — an important transition to be aware of if you’re an existing customer.

Pricing for the cloud version is calculated based on your number of employees and is quote-based via their online calculator — there’s no simple published tier. However, for a small employer, BrightPay is generally less expensive per employee than Sage, and the 60-day free trial is one of the most generous in the market.

Pricing (excl. VAT)

Cloud pricing is calculated based on employee numbers — use the BrightPay pricing calculator at brightpay.co.uk for a personalised quote. Bureau pricing (for accountants managing multiple employers) starts at £1,000/year for unlimited clients.

Key features

• HMRC-recognised, fully RTI-compliant
• Auto-enrolment with direct submission to NEST, The People’s Pension, and Smart Pension
• P45, P60, P11D, and payslip generation
• Employee self-service portal — payslips, leave requests, personal information updates
• Employer mobile app
• Direct bank payments via Modulr integration (payments processed in 90 seconds)
• API integration with Xero, Sage, QuickBooks, FreeAgent, and others
• Multi-user access — unlimited users can work on the same payroll file simultaneously
• 60-day free trial — the longest in this review

Our verdict:

BrightPay punches well above its price point and is particularly popular with small businesses that have moved away from Sage due to rising costs. If you’re happy using a standalone payroll product and want to keep costs down without compromising on features, BrightPay is an excellent choice.

5. Employment Hero – Best for HR and payroll in one platform

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Best for: Small businesses with 10–100 employees who want to consolidate HR, onboarding, and payroll into a single platform.

Employment Hero is an Australian-founded platform that has grown significantly in the UK market over the past three years. It positions itself as an all-in-one employment operating system, combining payroll, HR software, onboarding, performance management, and employee benefits in a single platform. If you’re currently paying for both an HR system and a payroll system separately, Employment Hero is worth evaluating as a consolidated alternative.

UK pricing is quote-based and tied to a per-employee-per-month model. Based on publicly available information, the Standard payroll plan starts at around £4/employee/month, with Premium from £6/employee/month, subject to minimum monthly commitments. The standalone payroll product (without HR features) is available from around £240/month for fortnightly or monthly pay cycles.

Pricing (excl. VAT)

Quote-based, based on employee numbers and modules selected. Indicative pricing (verified February 2026):

• Payroll only: From ~£240/month (minimum spend applies)
• HR + Payroll Standard: From ~£4/employee/month (minimum ~£90/month)
• HR + Payroll Premium: From ~£6/employee/month (minimum ~£140/month)

Contact Employment Hero directly for a personalised quote based on your headcount and requirements.

Key features

• HMRC-recognised payroll with full RTI compliance
• Auto-enrolment and pension management
• Automated pay runs — Employment Hero pulls time tracking and leave data automatically
• Employee self-service portal and mobile app
• Integrated HR — onboarding, performance reviews, leave management
• Employee benefits platform with perks and discounts
• Integration with Xero, Sage, and QuickBooks
• Employment law compliance tools and HR document templates

Our verdict:

Employment Hero makes most sense for small businesses that are growing into needing a proper HR system alongside payroll. If you’re currently using separate tools for HR and payroll, the combined platform can simplify operations and reduce overall costs.

6. FreeAgent – Best for freelancers and sole traders

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Best for: Freelancers, sole traders, and micro-businesses with just one or two employees who want simple accounting and payroll together.

FreeAgent is a cloud accounting platform designed specifically for freelancers, sole traders, and very small limited companies. Payroll is included within the FreeAgent subscription at no extra cost, making it a compelling option for business owners who want to handle both accounting and payroll without paying separately for each. It’s not the most powerful payroll system — FreeAgent’s payroll is better suited to simple setups with one or two employees — but for its target audience, it’s hard to beat.

FreeAgent is also available free to NatWest, Royal Bank of Scotland, and Ulster Bank business current account customers, which means many sole traders can access both accounting and payroll software for no additional cost at all.

Pricing (excl. VAT)

• Sole Trader: £19/month (or free with qualifying NatWest Group business accounts)
• Partnerships: £29/month
• Limited Companies: £33/month

All plans include payroll as standard.

Key features

• Payroll included in all subscriptions — no extra cost
• RTI submissions and PAYE calculations
• Auto-enrolment support
• Payslips, P45, P60 management
• Integration with HMRC for Self Assessment, VAT, and Corporation Tax
• Bank feeds from most major UK banks
• Receipt and expense management
• MTD for VAT and MTD for Income Tax compliant
• Free to NatWest, RBS, and Ulster Bank business account holders

Our verdict:

For freelancers, contractors, and sole traders with a small team, FreeAgent is outstanding value – especially if you bank with NatWest or RBS and can access it free. It’s not the tool to reach for as your team scales past 10 people, but for its primary audience it delivers everything needed in one simple package.

7. HMRC Basic PAYE Tools – Best free option for micro-businesses

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Best for: Micro-businesses with up to 9 employees who want a completely free, HMRC-provided solution.

Before spending any money on payroll software, it’s worth knowing that HMRC provides its own free payroll product called Basic PAYE Tools (BPT). It’s available for download from the HMRC website, handles RTI submissions directly, and supports standard payroll calculations including PAYE, NI, statutory payments, and year-end returns.

Basic PAYE Tools is designed for employers with nine or fewer employees, and it’s a legitimate option for the smallest businesses. It’s not pretty, it lacks an employee self-service portal, and it doesn’t integrate with accounting software — but it does the essential job, it’s always up to date with current legislation, and it costs nothing.

Pricing

Free. Available directly from HMRC’s website.

Key features

• Full RTI submissions to HMRC
• PAYE and National Insurance calculations
• Statutory Sick Pay, Maternity Pay, and Paternity Pay support
• P45 and P60 generation
• Always updated by HMRC when legislation changes
• Available for Windows, macOS, and Linux

Our verdict:

Basic PAYE Tools is worth considering if you have just one or two employees, you’re very cost-conscious, and you’re willing to manage auto-enrolment pension submissions separately. For most businesses, the time saved and errors avoided by upgrading to a paid product will justify the cost well within the first year.

Choosing the right payroll software for your business

As there are seven great options discussed above, the right option for you depends on four key questions:

1. Are you currently using accounting software?

If you are currently using Xero, QuickBooks, Sage, or Free Agent, then it would be easiest to stay within the same family of applications. With accounting integration you can reduce the amount of work needed every month to manage your payroll. Additionally, you will only have to deal with one monthly subscription fee, and one support team.

2. How many employees do you have (or plan to have)?

If you have one to five employees, the best value for money is going to come from either QuickBooks Payroll (as part of a basic QuickBooks plan), or FreeAgent. If you have a larger team of 10-50 employees, Sage or BrightPay could be good options. If you are looking to find a solution that combines both HR and payroll functions for your company, which is likely to start when you reach ten employees, Employment Hero may be something to look into. If you have a large number of employees (over fifty), you may want to take a closer look at an Enterprise level application such as Moorepay, or ADP.

3. Will you need HR features as well as payroll?

If you are employing your first few employees, you are likely to require nothing more than a simple payroll system. However, if you are establishing a new team and are now thinking about onboarding processes, performance evaluations, managing holiday entitlements, and complying with employment laws, an HR and payroll system such as Employment Hero will save you money compared to purchasing separate systems.

4. What is your budget?

The typical cost of payroll software for a small business is somewhere between £15 and £50 per month, depending on how many employees you have and what additional features you need. The least expensive payroll software available (excluding the free HMRC Basic PAYE Tool) is QuickBooks Core Payroll which adds to a Simple Start Accounting Plan for approximately £21.50 per month for five employees. Once the introductory discount expires, Sage Essentials will also be priced similarly. The cheapest option for a similar package of features compared to Sage is BrightPay.

What small businesses need to know about payroll compliance in the UK

In recent years, payroll compliance for small businesses in the UK has become more complex, and 2026 introduces several new regulations that small businesses should be aware of.

Real Time Information (RTI)

All employers must make a Full Payment Submission (FPS) to HMRC by the date of the pay run. Failing to submit your FPS on time, or failing to submit at all, will result in automatic fines. All the payroll software we reviewed above will automatically submit your FPS to HMRC.

Making Tax Digital for Income Tax

From April 2026, all self-employed individuals and landlords who earn more than £50,000 will need to report their income to HMRC on a quarterly basis using MTD compatible software. From April 2027, this requirement will extend to anyone who earns more than £30,000, and from April 2028 it will apply to everyone who earns more than £20,000. While MTD applies primarily to self employed individuals and landlords, it is worth ensuring that your accounting software is MTD compliant – Xero, QuickBooks, FreeAgent and Sage all comply with MTD requirements.

Auto Enrolment

Pension auto enrolment remains compulsory for all employees that meet certain criteria (i.e., they are between 22 and 66 years old, and they earn more than £10,000 per year). As an employer, you will need to assess whether your employees are eligible, enroll them in a pension scheme, contribute a minimum of 3% of the qualifying earnings of your employees, and submit the pension contributions to your pension provider. Many payroll solutions will automate the pension submission process, however, Basic PAYE Tools will not automate this process so you will need to complete the pension submission yourself.

The Employment Rights Act 2026

Small business owners will experience significant changes in employment law as a result of the Employment Rights Act 2026. These include day-one rights to unfair dismissal protection, stronger collective redundancy rules and new flexible working rights. All three of Sage, Employment Hero, and BrightPay have also confirmed that they will be upgrading their systems to accommodate the changes in this act. If you need help with compliance, then these three options offer the most comprehensive assistance.

National Minimum Wage

From April 2025, the National Living Wage (which applies to employees over 21) will rise to £12.21 per hour. There may be additional updates to the National Minimum Wage for 2026, but it would be expected that your payroll software would automatically update the rate for you – please contact your supplier to confirm whether or not this will be possible.Employment Rights Act 2026

Frequently asked questions

Summary: which payroll software should you choose?

GoSmallBusiness.co.uk is independent and reader-supported. Pricing correct as of February 2026 — always verify directly with the provider before purchasing. This article will be reviewed and updated every six months.