Best free payroll software for UK small businesses in 2024

The best free small business payroll software is 12 Cloud Payroll.

Following extensive research, we've determined that SMEs will be well-served by 12 Cloud's powerful range of features, good user support, and plentiful options to scale up – based on comparisons with the other eight top payroll providers on the market.

But free software does not always equal the most value for money. With business overheads critical, it's essential to understand not just the features of each free payroll software or service, but also what's missing – and any hidden fees. Also, between free and paid payroll software, which would really be the most beneficial for your business?

In this guide, we'll analyse the top free payroll service providers for small businesses, plus their drawbacks, so business owners can find the option that best meets their firm's unique requirements and objectives. Or if you're short on time, you can try our free 🔍online cost comparison tool.

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BEST OVERALL
Provider 12 Cloud Payroll	Provider IRIS Payroll Basics	Provider Capium	Provider Shape Payroll	Provider Primo Payroll
Best for Best for less-experienced small business users owed to its excellent support options	Best for Companies wanting a trustworthy system that is very user-focused	Best for Accountants that need access to free reporting tools	Best for Microbusinesses or side hustles	Best for Small businesses that employ a lot of freelancers
HMRC compliant	HMRC compliant	HMRC compliant	HMRC compliant	HMRC compliant

Get bespoke costing advice on the top payroll providers with our free comparison tool. Compare Costs

While free software is great as a basic starter option, paid payroll software tends to be much more feature-rich, and will better serve your business as it evolves and grows. Fortunately, payroll software doesn't have to be expensive. For example, Rippling – a software we recommend it for its customisable features and reports, and its helpful compliance assistance – starts at just £7 per user, per month.

Rippling starts at just £7 per user, per month

Try Rippling Customisable features and reports

1. 12 Cloud Payroll

12 Cloud Payroll offers a comprehensive suite of payroll and invoicing functions – including auto enrollment for pensions. It also boasts outstanding support features like live demo and email support. Each account has a specific payroll agent allocated if you ever need help with a particularly tricky issue.

We were also impressed by 12 Cloud Payroll's free trial, which is ten times more generous than any other in this list. Teams of more than 10 can sign up for a one year free trial and inform the 12 Cloud support team it was a test account. As long as you don't e-file the FYS (Final Submission for the Tax Year), you'll never be charged.

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

What are the limitations of 12 Cloud Payroll?

12 Cloud Payroll’s free offering is only available for businesses with up to nine employees. Once you have 10 or more people, you’ll need to pay £15 + VAT per employee per year. Larger SMEs will find other providers more cost-effective.

Still, that's better than Capium, which only permits three users on the free plan. And the free version is virtually identical to the paid version, making it a great fit for small firms.

2. IRIS Payroll Basics

IRIS is a very easy-to-use payroll system. Its best asset is definitely its smart interface, which is regularly updated with real-time adjustments to ensure your software is always fully HMRC-compliant – unlike rival systems which can tend to look quite outdated and feature annoying adverts, like Primo Payroll.

IRIS has also undergone significant M&A investment to offer third-party payroll systems like myPay to its 600,000 small business userbase. As a result, it grew by 30% last year, making it a smart choice for firms that want a system they can trust.

IRIS Payroll: 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

What are the limitations of IRIS Payroll?

Like 12 Cloud Payroll, Iris Payroll Basics is only free for up to nine employees. However, unlike 12 Cloud, the free version is very basic compared to the paid-for version. For example, RIS Free users can't roll back payslips from previous days in the event of an error.

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

3. Capium

Capium provides a variety of accounting tools, for which payroll is really more of an add-on than a singular tool to rely on. However, for very small accounting firms, it is an excellent budget option.

We particularly like that it offers data and analytics features (unlike IRIS) for free. That means you'll spend much less time building and delivering reports for clients and stakeholders. Keeping clients happy is particularly important in the current downturn as you don't want to risk losing custom.

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

What are the limitations of Capium?

Capium’s free payroll, called Normal Payroll is only free for up to three employees, a considerable drop from 12 Cloud and IRIS, and only really suitable for microbusinesses.

To get past this limit, you need to sign up for the Advanced Payroll module, which costs at least £15 per month. In this case, it's a smarter choice to 🔍compare payroll quotes to make sure you're really getting the best deal.

4. Shape Payroll

Shape Payroll is an excellent payroll system for new starters or those running a side hustle. The interface is specifically designed for entrepreneurs that want a fuss-free solution that can do one job well: run a single payroll.

You can easily set up and edit employee records and ensure that they're on the correct tax code. But while 12 Cloud offers advanced payroll features like a free payroll agent to assist users, that's about as far as Shape goes in terms of payroll functions.

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

What are the limitations of Shape Payroll?

As with Capium, Shape Payroll is only free if you’re paying three employees or fewer. The platform also lacks some advanced features, such as the ability to easily correct errors and reprocess payroll runs.

To add more employees, there is a standard charge of £5 per month, plus £1 per month for each additional employee.

5. Primo Payroll

Primo Payroll is a basic free payroll system that permits a generous 10-person limit, beating Capium and Shape Payroll. Plus, it lets you add users for a small additional fee.

We think it's the top option if you're a small employer that nevertheless hires a lot of freelancers. Even if you have a lot of different people working for your firm, Primo makes it easy to add them to your payroll.

Primo Payroll: Features

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

What are the limitations of Primo Payroll?

Primo Payroll’s free tier, Essentials Free Plus, can handle up to 10 employees. That said, if you need to add more employees, you’ll only be charged an additional £0.60 per payslip per month, which means it's suitable for larger teams that operate on a rota, like hospitality firms and retailers.

The free plan is still lacking many features offered by rivals, including straightforward tools like sending payslips by email (available for free on 12 Cloud) which means you'll be sacrificing a lot of value for employees for the cheaper option.

Is a free payroll system good enough?

While users can save on upfront costs, the best free payroll systems online for small businesses are still only suitable for micro SMEs. That's largely due to the cap on users – most are limited to nine employees and some, like Capium, only permit up to three.

There are other feature limitations that might make a free payroll system a bad choice for your company. For example, if you want to pay employees using SMS, you'll need to pay £15 to upgrade to the 12 Cloud Pay Bureau.

Microbusinesses with fewer than three employees will find free accounting software the best short-term solution. Small organisations more than a few months into their operations should invest in a more affordable option. Our guide to the best online payroll software has more information on what's available for tighter business budgets.

To see how paid-for payroll software could help your business, tell us about your unique payroll needs and get bespoke quotes from top UK providers with our 🔍free cost comparison tool.

How much does payroll cost?

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

One of the cheapest options is Pento. Its Core plan, for UK businesses with up to 30 employees, starts at just £5 per user, per month. Pricing for its Plus plan, for companies with up to 500 employees, is available on request, while its Premium plan pricing, for larger enterprises, is worked out on a bespoke basis.

Another affordable option is Rippling, which starts at just £7 per user, per month. Beyond that, Rippling charges custom pricing based on which of its services you'd like to use.

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? Here are some of the boxes a system definitely needs to tick:

1. It should be HMRC-certified. Make sure they are registered and certified with HMRC so you can easily submit payroll data. This will also mean it's set up to handle auto enrolment, making pension planning much simpler.
2. It should consider the cost and the size of your business. The more employees you pay, the higher the cost of your payroll software. Consider how many employees you have now, as well as how many you might hire this year. Check out our list of payroll software deals, which lists the latest offers and prices from top providers, to find an affordable option you.
3. It should cater to specific business needs. Do you have fairly complex circumstances that you need to make sure are catered for specifically?
4. It should be easy to use. Business users 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.

Larger SMEs (with more than ten employees) 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. It performs all the essential payroll tasks, and can be linked with virtually any Accounting, Time and Attendance software, or HR package.

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, like Sage payroll.

If you're still undecided about whether to find a free or cheap payroll provider, we can help make things simpler. Just try out our free 🔍online cost comparison tool with details about your business and we'll give you bespoke quotes from some of the UK’s top payroll providers.

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