Cashflow Forecasting for Payroll (UK 2025/26): keep salaries paid, on time, every time

Who this is for: owners and finance leads at UK SMEs with 5–30+ staff who want zero surprises when it comes to payday, PAYE, pensions and statutory costs.

Promise: you’ll learn the moving parts that make payroll volatile, and how to build a simple weekly view that keeps cash in the bank for payday, even in seasonal or lumpy months.

Why payroll is the #1 cashflow stressor for SMEs

Payroll isn’t just net pay. It’s also PAYE (Pay As You Earn) income tax, employee and employer National Insurance, auto-enrolment pensions, student loans, and statutory pay (sick, maternity, etc.). These costs don’t all leave your bank on the same day, which is why businesses with healthy sales still get caught short around the 15th–22nd. You must pay HMRC electronically by the 22nd of the next tax month (19th if by post). GOV.UK

Internal read: if you want the full cost picture before you model cash, start with our guide on payroll costs UK and hidden payroll fees (it’ll save you nasty surprises when you compare providers).

The five levers that move payroll cashflow

  1. Pay frequency (weekly vs monthly)
    Weekly runs mean more frequent net pay outflows. Monthly consolidates them, but HMRC still wants PAYE/NIC by the 22nd based on the previous tax month’s reports. That timing mismatch is what trips people up. GOV.UK
    Related guide: Weekly vs monthly payroll — cashflow and admin trade-offs.
  2. RTI submissions (FPS and EPS)
    You must send a Full Payment Submission (FPS) on or before pay day. If you need to reduce what you owe (for example because of statutory payments you can reclaim), send an Employer Payment Summary (EPS) by the 19th of the following tax month so HMRC applies it to what’s due by the 22nd. GOV.UK
    Related guide: Payroll services — what’s included (RTI, EPS, P60/P11D and more).
  3. Pension contributions (auto-enrolment)
    Minimum auto-enrolment is 8% of qualifying earnings, with at least 3% from the employer. Contributions often leave your bank days after payday, so build that timing into your forecast. The Pensions Regulator
    Related guide: Best payroll setup for SMEs (roles, controls, calendar).
  4. Employment Allowance (EA)
    Most eligible employers can reduce their annual secondary (employer) National Insurance bill by claiming Employment Allowance. Director-only companies are not eligible (where the sole director is the only employee liable for secondary Class 1 NI). Model EA as a monthly reduction to smooth your cash forecast — don’t wait to “true-up” at year-end. GOV.UK
    Related read: Employment Allowance explained (with director-only traps).
  5. Statutory payments (SSP, SMP, etc.)
    Most employers cannot reclaim Statutory Sick Pay under current rules, so budget it as a real cash outflow. For Statutory Maternity Pay, many employers can reclaim 92%, and 108.5% if they qualify for Small Employers’ Relief — but only if you report and offset correctly via EPS before the 19th. GOV.UK
    Related read: DIY vs outsourced payroll (who should handle statutory complexities).

Build a simple 52-week payroll forecast (step-by-step)

The goal is a rolling 52-week forecast that shows: (a) net pay dates and amounts, (b) HMRC PAYE/NIC deadlines and amounts, (c) pension payment dates, and (d) statutory costs and recoveries.

Step 1 – List your people and patterns
Add headcount, gross pay, student loan deductions, and any variable elements (overtime, commissions). Decide the pay frequency for each group.
Tip: capture standard starters/leavers timing to avoid missing an FPS. GOV.UK

Step 2 – Map the cash calendar
For each payday, place net pay on the calendar. For HMRC, place the single monthly cash outflow on the 22nd (electronic) tied to the previous tax month (6th–5th). For pensions, place the direct debit date from your scheme (often 3–10 days after payday). GOV.UK

Step 3 – Add Employment Allowance as a monthly credit
If eligible, spread your EA across the year to reduce the secondary NI portion each month. If ineligible (e.g., director-only), don’t model a credit. GOV.UK

Step 4 – Layer in statutory pay and recoveries
When SSP applies, treat it as a cost. For SMP (and similar), model both the outflow on payday and the recovery via EPS so it reduces what’s due to HMRC by the 22nd. Remember: EPS must be in by the 19th to affect that month’s payment. GOV.UK

Step 5 – Stress-test with seasonality
Create “high payroll” weeks (extra shifts, seasonal staff) and “low revenue” months. Check that your working capital (overdraft/cash buffer) covers the 22nd bottleneck plus pension direct debits.

Want the template? Grab our 52-week forecast template (Excel), pre-built with payroll tabs, HMRC 22nd markers, and pension timing. It includes a switch for weekly vs monthly runs and an EA toggle.

Worked mini-example (10 staff, monthly payroll)

  • Payday: last working day → net pay leaves the bank then.
  • HMRC: PAYE/NIC for that pay period is due 22nd of the next tax month (e.g., April pay hits HMRC by 22 May). GOV.UK
  • Pensions: direct debit set for the 5th of the following month (as per scheme). The Pensions Regulator
  • EA: apply a monthly reduction if eligible; zero if director-only. GOV.UK
  • Statutory: 1 employee on maternity? Model SMP outflow on payday and the 92% (or 108.5% for small employers) recovery via EPS before the 19th. GOV.UK

The point: even with “one” payroll, there are three separate cash events — net pay, HMRC, pension — plus potential statutory recoveries that depend on timely EPS.

Controls that keep payroll forecast-accurate

  • Cut-off discipline: lock hours/commissions 2–3 days before payday so your FPS and cash forecast match. GOV.UK
  • Calendar ownership: one owner for the pay calendar; one for the HMRC/EPS timetable (19th/22nd). GOV.UK
  • Exception log: track SSP/SMP/student loans in a simple log so recoveries get reported on EPS and reflected in cash. GOV.UK
  • Pension reconciliation: match payroll to the provider’s schedule monthly; late files can trigger missed or duplicate direct debits. The Pensions Regulator

DIY or outsource – what’s right for you?

If you love process and can keep to the 19th/22nd discipline, DIY with software can work. If you’d rather not carry compliance risk (RTI penalties, missed EPS, statutory reclaim errors), fully managed payroll adds value beyond “pressing the button”. See our payroll outsourcing costs explainer and DIY vs outsourced payroll comparison for real-world costings, admin time saved, and how providers handle exceptions.

What happens if you pay late?

HMRC can charge interest and penalties on late PAYE/NIC, and repeat issues can escalate. If your EPS isn’t in by the 19th, HMRC won’t net off statutory recoveries in time, meaning a bigger cash hit by the 22nd. GOV.UK

Quick FAQ

When is PAYE actually due?
By the 22nd of the next tax month if paying electronically (the 19th if paying by post). GOV.UK

Do director-only companies get Employment Allowance?
No — a company with a single director as the only employee liable for secondary Class 1 NI is not eligible. GOV.UK

What are the minimum pension contributions?
Total 8% of qualifying earnings, with at least 3% from the employer. The Pensions Regulator

Can I reclaim Statutory Sick Pay?
Generally no under current rules. For SMP and some other statutory payments, you can usually reclaim 92% (or 108.5% with Small Employers’ Relief) via EPS. GOV.UK

What to do next

Related guides to explore next:

Notes on sources used in this article

HMRC/TPR references for PAYE deadlines, RTI (FPS/EPS), Employment Allowance eligibility, statutory pay recovery rules, and minimum pension contributions are cited inline above. Key pages include GOV.UK’s guidance on Pay PAYE and Paying HMRC (deadline on the 22nd), Reporting via EPS (deadline on the 19th), Employment Allowance eligibility (director-only exclusion), Statutory Sick Pay and Recover statutory payments, plus The Pensions Regulator’s pages on minimum employer contributions for auto-enrolment.