Best free payroll software for UK small businesses in 2022

Overall, 12 Cloud Payroll is our top choice for free small business payroll software – it’s free for very small businesses and boasts a powerful range of features and good support options.

Other top contenders are IRIS Payroll Basics, which offers an easy upgrade path to a paid plan as your business grows, and Capium, which is specifically designed for accountants.

We’ve based these recommendations on our more than 20 years of small business experience, taking into account features, design, ease of use and scalability.

We’re also here to explain the drawbacks of free payroll software, and discuss how using an affordable paid plan could really help your business.

To see how this could work for you, just answer a few questions to get bespoke payroll service quotes from top UK providers.

Our research found that 12 Cloud Payroll is the best overall free payroll software – it’s free for up to nine employees, includes some powerful features, and is much easier to use than some of its rivals.

1. 12 Cloud Payroll

Features

• RTI compliant
• Handles auto enrolment
• Automatically generates P11, pay summaries and other reports
• Can export key data
• Offers employee payroll accounts
• Compatible with accounting packages

Limitations

The key limitation of 12 Cloud Payroll’s free offering is that it’s only free for businesses with up to nine employees.

Once you have 10 or more people, you’ll need to pay £15 per employee per year, so larger SMEs may find other providers more cost effective.

Apart from that, the free version is virtually identical to the paid version, making it a great fit for very small businesses.

To see exactly how Cloud 12 Payroll stacks up to the top paid payroll providers, just complete our quick quiz to get personalised quotes for your business.

2. IRIS Payroll Basics

Features

• Complies with GDPR and automatically backs up data with each use
• Handles auto enrolment and produces pension reports
• Generates and manages mandatory employee forms as and when you need them
• Offers an easy upgrade path to paid plan

Limitations

Like 12 Cloud Payroll, Iris Payroll Basics is only free for up to nine employees. However, unlike 12 Cloud, the free version is not extremely similar in quality to the paid version.

Instead, IRIS has produced a basic version for very small businesses. This does everything you need it to, but it can look a bit bare bones and be tricky to use.

IRIS doesn’t publish prices for its paid plans, but our payroll comparison service will quickly get you quotes from top UK providers tailored to the needs of your business.

3. Capium

Features

• Simple FPS and EPS submissions
• Easy-to-use auto enrolment option
• Supplementary submission forms
• Straightforward end-of-year submissions
• Analytics for payroll reports

Limitations

The central limitation of Capium’s free payroll is that it’s only free for up to three employees, so is only really suitable for microbusinesses.

To get past this limit, you need to sign up for advance payroll, which costs at least £15 per month.

And if you're growing at that level, there are much more affordable payroll options. In other words, if you have more than three employees, you'll need to use the full range of Capium's services in order for it to be cost effective.

Need help finding the right payroll solution for your business?

Answer a few quick questions and get bespoke payroll quotes for free.

4. Shape Payroll

Features

• Starter wizard makes it easy to learn the platform
• Generate password-protected payslips
• Easily create P60 and P45 forms
• Automatically assess your staff for auto enrolment

Limitations

As with Capium, Shape Payroll is only free if you’re paying three employees or fewer, so it’s another free option that only suits microbusinesses.

If you need to add more employees, you’ll pay a standard charge of £5 per month, plus £1 per month for each additional employee.

The platform also lacks some advanced features, such as the ability to easily correct errors and reprocess payroll runs.

5. Primo Payroll

Features

• RTI submissions
• Auto enrolment integration
• Low priority email support

Limitations

Primo Payroll’s free tier, Essentials Free Plus, can handle up to 10 employees. But if you need to add more, you’ll have to pay £0.60 per payslip per month.

The free plan is also lacking many features offered by rivals, including straightforward tools like being able to email payslips or easily handle holiday pay.

Is free good enough?

When you look at the best free UK payroll software, one thing very quickly becomes clear.

These plans are only suitable for a very small number of SMEs – a limit of nine employees is common, and some are even limited to three.

So, if you’re just starting out or running a microbusiness, you might be able to easily handle payroll for free – but everyone else should use a paid payroll plan.

To see how fully featured paid payroll software could help your business, just tell us about your needs and get bespoke quotes from top UK providers.

How much does payroll cost?

The cost of payroll can vary wildly depending on how many employees you have and what level of service you need.

But to give you some idea: Sage’s intuitive cloud payroll starts from £7 per month for up to five employees, rising to £27 per month for up to 25 employees (there are eight payment tiers in total).

A paid Shape Payroll plan comes in at a similar cost, at £5 per month for up to five employees, plus £1 per month for each additional employee.

However, if you have complex needs or want a fully managed payroll service, you should be prepared to pay much more.

How to choose the right payroll software for your business

So, how do you work out which payroll provider is the right fit for your business?

Well, there are certain boxes they definitely need to tick – make sure they are registered and certified with HMRC so you can easily submit your payroll data, and make sure they’re set up to handle auto enrolment so sorting employee pension payments is a doddle.

Aside from that, you need to consider cost and the size of your business. The more employees you pay, the higher the cost of your payroll software – so consider this not only in terms of how many employees you have now, but also how you might scale in the next year or two.

You also need to think about what you actually need your payroll software to do. Do you have fairly normal needs, or complex circumstances that you need to make sure are catered for specifically?

And, like with all software, ease of use is hugely important. You (or whoever will be using the software) want a service that makes things quick and simple, with an intuitive interface and a gradual learning curve that makes it easy to get to grips with.

Finally, larger SMEs should consider using a managed payroll service. These providers take care of your payroll completely, but can cost more than payroll software providers. To learn more, check out our guide to the best managed payroll providers.

Final thoughts

Overall, 12 Cloud Payroll is our top choice for free payroll software, and this provides a decent service for very small businesses.

However, 12 Cloud is only free for up to nine employees, and is a pretty basic offering compared to what you’d get with low-cost paid payroll software.

To get a good idea of the options out there, just tell us a bit about your business and get bespoke quotes from some of the UK’s top payroll providers.

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