Cheap payroll explained – Finding the cheapest payroll software and services for UK businesses

Looking for cheap payroll solutions? In the fast-paced, cost-sensitive world of small and medium-sized enterprises (SMEs), payroll remains one of the most significant yet complicated tasks that must be handled efficiently. The advent of digital technology has made this task easier, with various software and services available to help businesses manage their payroll systems effectively.


Video: Answering your common questions about payroll prices and costs

However, cost is always a major concern for many businesses, particularly those on a tight budget. This article aims to demystify the world of cheap payroll software and services available for UK businesses.

The need for payroll software

Payroll is not merely about paying your employees on time. It also involves complying with HM Revenue and Customs (HMRC) regulations, calculating National Insurance contributions, managing pensions, and keeping accurate records.

Mistakes in these processes can lead to fines and penalties, making it crucial for businesses to manage their payroll efficiently.

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Factors to consider when choosing cheap payroll software

When looking for affordable payroll options, consider the following:

  1. User-friendly interface: A simple interface will make it easier to manage payroll processes.
  2. Compliance with UK laws: The software must be compliant with HMRC regulations.
  3. Cloud-based services: These allow access to payroll data from any location.
  4. Scalability: Opt for software that can adapt to your business growth.
  5. Customer support: Good customer service can be invaluable, especially if you encounter issues.

Top cheap payroll options in the UK

Here’s a table to give you an at-a-glance comparison of the cheap payroll options available for UK businesses:

SoftwareStarting Price per MonthHMRC CompliantCloud-BasedEmployee CapAuto-enrolment for PensionsAdditional Features
Xero Payroll£10YesYesScalableYesIntegrates with accounting tools
BrightPay£99/yearYesNoScalableYesOne-off payment
QuickBooks Payroll£4 (first 6 months)YesYesScalableYesReal-time data insights
PayrooFree for up to 9 employeesYesYes9YesFree option available
Moneysoft£60/yearYesNoScalableYesE-filing, payslip generation
Sage£3.60YesYesUp to 5Yes24/7 customer support
12PayFree to £60/yearYesNoLimitedPremium onlyBasic functionalities
PayFitCustomYesYesScalableYesReal-time modifications
MyPAYE£20YesYesScalableYesReal-time information, automated backups
Cheapest payroll software and services compared

Please note that the prices and features can change over time, so it’s always good to visit the respective websites for the most up-to-date information. For more, see our payroll comparison tool.

Xero Payroll

Xero offers a payroll service as part of its accounting software package. It’s user-friendly, HMRC compliant, and starts at around £5 per month for small businesses. It is highly scalable and integrates well with other financial management tools.

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BrightPay has a one-off cost, starting at around £99 for the micro-business package, making it an affordable choice for small businesses that do not require ongoing subscriptions. It is HMRC recognised and offers a multitude of features like automated enrolment for pensions.


QuickBooks Payroll is another affordable option, starting at around £4 per month for the first six months. It offers real-time data insights and is compliant with HMRC regulations. It also has an easy-to-use interface and robust customer support.


FreeAgent is a good option for freelancers and very small businesses. Starting at £9.50 per month, it offers basic payroll functions and is compliant with HMRC regulations. However, it may not be suitable for businesses that require extensive payroll services.

The long list – other affordable payroll solutions

While the payroll software and services already mentioned are strong contenders for cost-effective payroll solutions, there are several other options available that cater to different needs and budgets. Let’s delve into some additional choices for those looking for affordable payroll solutions in the UK.


Payroo offers a free payroll service that caters to small businesses with up to 9 employees. Despite its no-cost model, the platform is HMRC recognised and supports automatic enrolment for pensions. For businesses with more than 9 employees, the cost goes up incrementally but remains quite affordable.

Moneysoft Payroll Manager

Starting at £60 per year, Moneysoft Payroll Manager is another cost-effective option for small businesses. The software is regularly updated to remain compliant with HMRC and pensions regulations. It offers robust features such as e-filing, payslip generation and tax calculations.

Sage Business Cloud Payroll

Sage has been a key player in accounting and payroll software for years. Their cloud-based payroll service starts at £3.60 per month for businesses with up to 5 employees. Sage’s software is HMRC compliant, and they offer 24/7 customer support, making it a good balance between affordability and comprehensive service.


This is another free option for businesses with fewer employees. 12Pay is suitable for small companies looking for basic payroll functionalities such as payslip generation and tax calculations. For more advanced features like auto-enrolment for pensions, they offer premium plans starting at around £60 per year.

12Pay website


A newer entry into the payroll scene, PayFit offers a range of features from payslip generation to real-time modifications. The pricing is tailored based on the features and the number of employees, making it a scalable option. While they don’t publish exact pricing, their modular approach allows small businesses to select only the services they need, potentially keeping costs low.


MyPAYE offers a cloud-based solution that’s aimed at simplicity and ease of use. Starting at around £20 per month, it may not be the cheapest, but it’s a full-featured, robust system that can grow with your business. It’s fully HMRC compliant and offers a variety of features like real-time information submission and automated backups.

MyPAYE pricing page

The downside of cheap payroll services

While these options are affordable, they might lack some advanced features available in more expensive packages. For instance, some may not offer employee self-service portals or multi-currency support. Therefore, carefully assess your needs before settling for a cheaper service.

Factors that can make payroll processing more expensive

While the focus of this article is on cheap payroll options, it’s essential to understand the elements that can drive up the cost of payroll processing. Some of these factors could even apply when using budget-friendly payroll software and services. Knowing what these factors are can help you make an informed decision when selecting a payroll solution.

1. Complexity of payroll

The more complex your payroll is, the more expensive it will be to process. Factors such as varied pay rates, bonuses, commissions, and deductions for benefits can make the payroll process intricate and time-consuming.

2. Employee count

The more employees you have, the more you’ll need to spend on payroll processing. Many providers charge extra for additional employee profiles, especially when you exceed the limits of basic plans.

3. Regulatory compliance

Staying compliant with evolving tax laws and employment regulations often requires regular updates or add-ons to your software. Some providers may charge extra for compliance features or updates.

4. Additional features

Many software options offer basic features at a low cost but charge extra for add-ons like timesheet tracking, advanced reporting, or employee self-service portals.

5. Multi-location and multi-currency support

If your business operates in multiple locations or deals in multiple currencies, you may need to invest in more advanced, and hence, more expensive payroll software to meet these specific requirements.

6. Manual interventions

If your low-cost software lacks certain automation features, you might find yourself spending more time on manual tasks, which, although hard to quantify, is a hidden cost in terms of lost productivity.

7. Customer support

While customer support is often crucial for smooth operations, some providers offer only basic support in their cheaper plans and charge extra for premium support services, like 24/7 assistance or dedicated support agents.

8. Data migration and training

Switching to a new system can involve data migration and employee training costs. Some providers offer these services for free, but others might charge a fee.

9. Contracts and commitment

Some providers offer lower monthly rates if you commit to an annual contract. While this may seem cheaper upfront, it could become costly if the service is not a good fit for your business, as you may still be liable for the contract’s duration.

10. Hidden costs

Always read the fine print. Some services have hidden fees for things like set-up, overage charges, or even for generating additional reports.

Understanding these factors can help you make a more informed decision when choosing a payroll service. Consider not just the upfront costs but also the potential long-term expenditures related to the software’s limitations or extra services you may require.


Payroll management is crucial for any business, big or small.

While the temptation to cut corners and go for the cheapest option is high, one must not compromise on essential features like HMRC compliance and robust customer support.

Software like Xero Payroll, BrightPay, QuickBooks, and FreeAgent offer reasonable, budget-friendly options for UK businesses looking to manage their payroll without breaking the bank.

FAQ for cheap payroll companies

What does ‘HMRC compliant’ mean?

HMRC compliant means that the software meets the requirements set by Her Majesty’s Revenue and Customs for payroll reporting and tax calculations.

What is auto-enrolment for pensions?

Auto-enrolment is a government initiative requiring employers to automatically enrol eligible employees into a pension scheme and make contributions.

Are there free payroll software options available?

Yes, some options like Payroo offer free packages for businesses with a small number of employees.

What is cloud-based payroll software?

Cloud-based software stores your payroll data on remote servers, allowing you to access it from anywhere with an internet connection.

Is customer support essential for payroll software?

While the need for customer support may vary, it’s generally considered essential for resolving issues and ensuring smooth operation.

Can I switch payroll providers easily?

It’s usually possible to switch, but the process can be complex. It often involves exporting and importing data and ensuring compliance is maintained.

Is cheap payroll software secure?

Security measures can vary, but most reputable providers offer robust encryption and security protocols.

How often is payroll software updated?

Software is usually updated regularly to include new features and ensure compliance with the latest regulations.

Can cheap payroll software handle bonuses and commissions?

Most can handle various forms of compensation, but you may need to manually configure these options.

What is scalability in payroll software?

Scalability means that the software can grow with your business, allowing you to add more employees or features as needed.

How do I know if a software is right for my business size?

Most providers specify the number of employees their software is optimised for. Choose one that fits your current and anticipated future needs.

Do these software options offer mobile access?

Some, like Zoho Payroll and FreeAgent, offer mobile applications or responsive websites for on-the-go access.

Can I integrate payroll software with other business systems?

Many payroll software options offer integration with accounting software and other business systems.

Are there any hidden costs in cheap payroll software?

Always read the terms and conditions. Additional fees may apply for extra features, support, or when exceeding employee caps.

Can I use this software for freelance or contract work?

Some options like FreeAgent are specifically tailored for freelancers and contractors.

How does payroll software handle tax codes?

Most software will automatically update tax codes but double-check to ensure they align with HMRC regulations.

What are real-time data insights in payroll?

This refers to the ability to view and analyse payroll data in real-time, helping with decision-making and reporting.

Can I generate payslips automatically?

Most payroll software options offer automatic payslip generation, often with customisable templates.

How do I set up a new employee in the payroll system?

The process varies, but generally, you’ll need to enter personal details, tax codes, and salary information to add a new employee.

Do any of these cheap options offer multi-currency support?

Some may offer multi-currency options, but this is generally found in more premium packages.

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