How long should you keep payroll records in the UK?

Keeping accurate payroll records isn’t just a good habit; in the UK, it’s a legal requirement.

For all employers, knowing how long to keep your payroll records — and complying with UK and European requirements — helps ensure that you can easily handle audits, and avoid penalties and other legal headaches.

But what exactly does your business need to do? In this article, we’ll break down which documents you need to keep, how long you need to keep them for, and everything else you need to be aware of. So let’s jump straight in.

What are payroll records?

Payroll records refer to any documentation related to paying your employees, including:

• Employee names, addresses, and National Insurance (NI) numbers

• Payslips and payment history

• Salary and wage rates

• Hours worked

• Statutory payments (such as sick pay, maternity, and paternity)

• Pension contributions

• Tax codes and deductions

• P60s, P45s, and RTI submissions to His Majesty’s Revenue and Customs (HMRC)

• Employment contracts and changes to pay or benefits

These records form the foundation of your compliance with Pay As You Earn (PAYE), tax reporting, and employment law.

Why does payroll record retention matter?

Put simply, keeping payroll records helps protect your business and your employees. They serve as proof of wage payments, tax filings, and compliance with labour laws, and if you’re ever audited by HMRC or face a labour dispute, these records are your first line of defence.

Failing to keep payroll records for the required amount of time can result in fines, back pay settlements, or even legal action.

How long are payroll records required to be kept in the UK?

The general rule is: payroll records must be kept for at least 3 years from the end of the tax year they relate to.

This requirement is set by HMRC to support PAYE record-keeping rules, and to help resolve any disputes about employee pay or tax.

Exceptions and best practices

While three years is the legal minimum, many employers choose to keep records for six years. This is in line with the Limitation Act of 1980, which allows legal claims (like breach of contract or unpaid wages) to be brought within that timeframe.

As a result, it’s advisable to retain payroll records for six years to fully protect your business and ensure audit readiness.

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GDPR and payroll records

Payroll data is personal data — and often denoted as special category data — under the General Data Protection Regulation (GDPR). That means it must be stored, processed, and disposed of securely.

Key GDPR principles for payroll records include:

• Lawful basis. You must have a legitimate reason (e.g. a legal obligation or employment contract) to collect and store payroll data.

• Storage limitation. You must not keep data for longer than is necessary. Once the retention period ends, you must securely delete or anonymise it.

• Data security. You must protect your payroll data against unauthorised access, loss, or breaches.

• Employee rights. Employees have the right to access their data, correct inaccuracies, and in some cases, request deletion.

It’s often a good idea to include your payroll record retention policy in your data protection documentation and employee privacy notice.

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What are the penalties for non-compliance?

Failing to retain your payroll records properly can lead to:

• HMRC fines or investigations for missing PAYE records.

• Legal disputes over pay, benefits, or deductions.

• Information Commissioner’s Office (ICO) enforcement action under GDPR for mishandling personal data.

• Loss of trust from employees if their sensitive data is mismanaged.

Keeping compliant, complete, and secure records helps you avoid these risks.

How do you keep payroll records?

When adhering to payroll recordkeeping requirements, there are a few best practices you can follow to make the entire process easier, safer, and more efficient. Aim to:

• Go digital. Use a secure, cloud-based payroll platform to store and manage your records efficiently. This helps with organisation, security, and disaster recovery.

• Create a retention schedule. Map out what records need to be kept and for how long, based on HMRC and GDPR guidelines. And automate reminders to audit and purge old files.

• Keep backups. Always maintain backup copies in a separate, secure location — either cloud-based or physical — to protect against data loss.

• Restrict access. Employee payroll information is hugely sensitive. Limit access to only those who need it, and implement strong authentication protocols.

• Document access and changes. Keep audit trails of who accesses or modifies your payroll records, especially if you have multiple HR or finance users.

• Stay compliant. Payroll laws change. Set a reminder to review retention guidelines annually.

How can Remote help?

Payroll compliance is an ongoing responsibility. By understanding and following payroll record retention requirements, your business reduces risk and stays audit-ready.

However, it can also be a time-consuming, resource-intensive process — especially for small employers juggling multiple hats.

With Remote Payroll, we make the entire process simple and painless. As well as running payroll seamlessly, we ensure you’re fully compliant with all UK tax and employment laws (even when they change), and securely store your data and records for easy access.

To learn more about how we can make payroll compliance a piece of cake, speak to one of our friendly experts today.

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