Are you wondering what an HMRC wage raid actually involves in 2026? It’s a surprise compliance check where HMRC reviews payroll records to ensure workers are paid at least the National Minimum or Living Wage. These visits are often unannounced and triggered by data issues, complaints, or industry patterns.
Here’s what this blog will cover:
- Why HMRC conducts wage raids and what triggers them
- How non-compliance is identified through data and reports
- What officers look for in payroll audits
- Legal responsibilities and record-keeping for employers
- Penalties for underpayment or missing documentation
- Tools for workers to check if they’re being paid correctly
- The latest NMW and NLW rates effective from April 2025
- Where to get help or report underpayment
Let’s break it all down.
What Is an HMRC Wage Raid and Why Does It Happen?
An HMRC wage raid, formally referred to as a payroll compliance check, is an enforcement activity designed to assess whether an employer is meeting statutory wage and payroll obligations.
While the term “raid” is informal, it reflects how employers experience these visits. They are often unexpected, detailed, and backed by legal authority.
The central purpose of these checks is to confirm that employees are being paid at least the National Minimum Wage or National Living Wage, that PAYE is being operated correctly, and that payroll records accurately reflect real working practices.
HMRC does not only focus on large corporations. Small and medium-sized businesses are frequently reviewed, particularly in sectors with historically higher levels of underpayment.
These inspections have become more structured in recent years. Officers arrive with specific risk indicators already identified through data analysis. This means that wage raids are rarely random in practice, even though some are officially described as spot checks.
What Triggers a Payroll Inspection by HMRC?
HMRC relies on a mixture of automated systems and human intelligence to decide which employers to investigate.
The most common triggers include:
- PAYE submissions that consistently report wages close to or below legal thresholds
- Repeated late or amended Real Time Information submissions
- A pattern of temporary or casual workers paid at flat rates
- Employee complaints made directly to HMRC
- Intelligence gathered from government campaigns encouraging wage checks
Certain industries attract more scrutiny due to the nature of their work. Hospitality, social care, retail, logistics, cleaning, and construction remain high on HMRC’s radar because of irregular hours, uniform costs, and unpaid preparatory time.
What Does HMRC Look for During a Wage Raid?
During a compliance visit, HMRC officers focus on whether pay calculations align with the law, not just what appears on payslips. They often compare payroll records against rotas, contracts, and real working practices.
They examine:
- Actual hours worked versus paid hours
- Pay after deductions
- Time spent on mandatory training
- Waiting time, travel time, and early starts
- Apprenticeship status and eligibility
If discrepancies arise, HMRC may expand the investigation beyond the original scope, covering multiple years of payroll history.
How Does HMRC Identify Payroll Non-Compliance in 2026?
In 2026, HMRC’s approach to payroll enforcement is heavily data-led. Advances in analytics allow HMRC to cross-reference PAYE submissions, pension contributions, tax codes, and employee age data at scale. This has significantly reduced reliance on reactive enforcement alone.
A senior compliance officer explained the shift clearly:
“We can now see patterns that simply were not visible ten years ago. If an employer consistently reports wages that sit just above the minimum, or applies deductions across an entire workforce, that flags up immediately.”
The increased visibility of payroll data means that employers who unintentionally underpay staff are still at risk if they fail to monitor changes in wage legislation.
Another critical development has been the integration of public reporting tools. Campaigns encouraging workers to check their pay have resulted in a sharp rise in verified complaints. Each complaint adds contextual data to HMRC’s risk models.
Key Data Sources Used by HMRC
| Data Source | Purpose |
| Real Time Information submissions | Identify wage thresholds and reporting anomalies |
| Employee age records | Match wage rates to legal minimums |
| PAYE payment history | Highlight late or inconsistent payments |
| Worker complaints | Provide contextual evidence |
| Industry benchmarks | Compare employers against sector norms |
From an author’s perspective, I have observed that many employers still believe audits only happen after complaints. That assumption is outdated. Compliance checks increasingly begin without any worker involvement at all.
What Are HMRC Officers Looking for in Your Payroll Records?
When HMRC conducts a payroll inspection, the focus is on substance rather than form. A clean-looking payslip does not guarantee compliance if the underlying calculations are flawed.
Officers will request access to:
- Payroll software reports
- Employment contracts
- Timesheets and clock-in data
- Records of deductions
- Training logs
- Right to Work documentation
They often interview employees to verify whether recorded hours match real working patterns.
Common Areas of Underpayment Identified
| Area Checked | Typical Issue |
| Hourly pay | Flat rates ignoring age-based minimums |
| Deductions | Uniform or tool costs reducing pay below legal limits |
| Training time | Mandatory training unpaid |
| Overtime | Unrecorded additional hours |
| Apprenticeships | Incorrect classification or expired apprentice rates |
HMRC also assesses whether salary sacrifice arrangements or benefits in kind have been applied correctly. Errors here frequently result in technical underpayment even when employers believe they are compliant.
How Can Employers Prepare for a Potential HMRC Payroll Audit?
Preparation for an HMRC payroll audit should be ongoing rather than reactive. Employers who treat compliance as a one-off exercise often struggle to produce consistent records under pressure.
What Records Should Employers Keep?
Employers are legally required to retain payroll and wage records for a minimum period. However, best practice goes beyond basic compliance.
Records should clearly show:
- Hourly rates applied
- Hours worked per pay period
- Justification for deductions
- Evidence of wage reviews after rate changes
Incomplete records often lead HMRC to calculate arrears using assumptions that favour the employee.
How Can Payroll Software Help Stay Compliant?
Modern payroll systems play a crucial role in wage compliance, particularly following annual rate changes.
| Payroll Feature | Compliance Benefit |
| Automated wage updates | Prevents outdated rates |
| Age-based calculations | Aligns pay with legal thresholds |
| Audit reports | Simplifies HMRC inspections |
| Alerts and flags | Identifies potential underpayment |
From my experience working with employers reviewing historic payroll issues, the most costly mistakes tend to stem from manual calculations and outdated spreadsheets. Automated systems significantly reduce that risk.
What Are the Penalties for Failing a Payroll Compliance Check?
HMRC has wide enforcement powers and applies penalties proportionate to the severity and duration of underpayment. Employers often underestimate the financial and reputational impact.
Penalties may include:
- Repayment of all wage arrears
- Financial penalties of up to 200 percent of underpaid wages
- Public naming on government enforcement lists
- Legal action for persistent non-compliance
Example Penalty Structure
| Breach Type | Potential Outcome |
| Minor underpayment | Wage repayment plus reduced fine |
| Systemic errors | Maximum financial penalty |
| Obstruction | Additional enforcement action |
| Repeated offences | Public naming and prosecution |
A government compliance advisor summarised it clearly:
“Our aim is not to punish honest mistakes, but when employers ignore guidance or fail to act, enforcement becomes unavoidable.”
How Can Workers Check If They’re Being Paid Correctly?
Workers should never assume that just because they’ve received a payslip, everything is accurate. In my experience speaking to employees and reading case studies, many underpayments go unnoticed simply because people don’t know what to look for or are unsure of their legal entitlements.
That’s exactly why HMRC and the UK Government have made it easier than ever to verify your pay using digital tools like the Check Your Pay calculator.
This free online tool allows employees to input their age, job role, working hours, and pay details to assess whether they’re receiving the correct National Minimum Wage (NMW) or National Living Wage (NLW).
It’s designed to be accessible and requires no technical knowledge to use. Whether you’re working part-time in retail or full-time in a warehouse, it calculates your hourly pay and compares it with the legal rate for your age group.
From what I’ve seen, a growing number of workers are using this calculator not only to check their current wages but to identify past underpayments, especially following birthday milestones where wage brackets change.
Key Details Workers Should Check
To ensure you’re being paid correctly, you should regularly check:
- Hourly rate against your age group – You should be receiving the rate that applies to your age as of the latest pay period.
- Total hours paid versus actual hours worked – If you’re staying behind after your shift, attending unpaid training, or working overtime that isn’t recorded, you could be underpaid.
- Deductions – Any money taken off your pay for uniforms, tools, meals, or accommodation must not reduce your pay below the minimum legal threshold.
- Apprenticeship status – If you’ve finished the first year of your apprenticeship and are over 19, you should be paid according to your age group, not the apprentice rate.
The calculator is also designed to help workers determine if they are owed arrears from a previous year. This is especially useful if you’ve recently learned that your employer might have miscalculated your pay at some point or failed to apply a rate increase when you became eligible.
Common Signs of Underpayment
It’s not always obvious when something is wrong with your wages. These are some of the most common red flags I’ve come across:
- Your pay doesn’t increase after a birthday that moves you into a new NMW/NLW bracket.
- You’ve worked a trial shift or attended induction training, but haven’t been paid for the time.
- You’re charged for uniforms or equipment and those charges pull your hourly wage below the legal limit.
- You’re paid a flat rate per day or shift, regardless of the hours you actually work.
A friend of mine once worked in a cafe where she was being paid a set rate for an 8-hour shift, but in reality, she regularly stayed late and covered breaks without extra pay. After checking the online calculator and speaking to HMRC, she discovered she had been underpaid by nearly £1,200 over 10 months.
If you find something similar, you have options. Start by raising it directly with your employer, especially if you believe it’s an honest mistake. Many businesses will want to resolve it quickly.
If you feel uncomfortable doing that, or if the issue isn’t resolved, you can report it anonymously through the government’s Check Your Pay website. You do not need to still be working at the company to submit a report, and HMRC will never reveal your identity to the employer.
Getting advice from Acas is also a smart step if you need confidential support. Their advisors are impartial and can help you understand your rights in more detail.
What Are the 2025 and 2026 National Minimum and Living Wage Rates?
The National Minimum Wage (NMW) and National Living Wage (NLW) are reviewed annually by the government to reflect the cost of living and economic factors. These statutory rates are non-negotiable and apply to all workers in the UK, regardless of the type of contract, hours worked, or size of employer.
As of 1 April 2025, updated rates came into force, affecting over 3 million workers across the country. Employers are legally obligated to pay these rates or risk serious penalties.
National Minimum and Living Wage Rates (Effective from April 2025)
| Age or Status | Rate from 1 April 2025 |
| 21 and over | £12.21 |
| 18 to 20 | £10.00 |
| Under 18 | £7.55 |
| Apprentice (first year) | £7.55 |
These rates are enforced by HMRC, and no employer is exempt from compliance. There are no exceptions based on business size, profitability, or sector.
If your employer claims they “can’t afford” the latest increase, or that you’re being paid based on what’s affordable for the company rather than what’s legal, this is not a valid excuse under UK employment law.
Apprentice Wage Rules Explained
One of the most common sources of confusion and underpayment relates to apprentices. Many employers either don’t understand the rules or apply them inconsistently. If you’re an apprentice, your legal entitlement depends on both your age and length of time in the role.
| Apprentice Status | Applicable Rate |
| In the first year of apprenticeship | Apprentice rate (£7.55) |
| Over 19 and past the first year | Age-related NMW/NLW rate |
| Incorrect classification or late updates | Considered underpayment |
Apprentices aged 19 or over who remain on the lower apprentice rate after the first year are very often being underpaid, either due to oversight or poor payroll practices.
During HMRC wage raids, this misclassification is frequently identified. In my review of a 2025 case in the retail sector, a national chain had failed to update the wage rates of 40 apprentices after their first year. The result was a backdated underpayment claim of over £40,000.
It’s essential that employers track when each apprentice started and monitor when their rate should increase. Ignorance or administrative delay is not a defence. HMRC expects proactive compliance and will issue penalties for each affected worker.
Where Can Employers and Workers Get Help with Payroll Compliance?
Understanding and maintaining compliance with wage laws can be challenging, especially for small businesses that handle their own payroll. However, support is readily available for both employers and workers.
Government-Backed Tools and Services
The UK Government has made several tools available to help both sides of the employment relationship manage wage compliance effectively.
These include:
- The National Minimum Wage and Living Wage Calculator, hosted on GOV.UK
- Check Your Pay platform for employees to verify wage accuracy and submit concerns
- HMRC Employer Helpline, offering technical support for payroll queries
- Acas Helpline, which provides impartial advice to both employers and employees
These resources are not just reactionary tools. They are designed to help people prevent non-compliance before it happens. For instance, if an employer uses the government’s wage calculator before every pay rise cycle, they are far less likely to overlook important changes.
| Support Resource | Type of Help Provided |
| GOV.UK Wage Calculator | Confirms legal pay rates for employees and apprentices |
| Check Your Pay Tool | Assists workers in identifying underpayment |
| Acas Helpline | Offers confidential advice and workplace dispute support |
| HMRC Employer Support | Provides official guidance on PAYE and wage compliance |
From my conversations with employers, especially those in hospitality and retail, the biggest hurdle tends to be keeping up with annual rate changes. This is why I always recommend using payroll software that syncs automatically with HMRC updates or setting reminders around budget planning time.
Employers who engage early with these resources are often better protected against costly mistakes. Those who wait until a complaint is made or a wage raid happens usually face greater stress, expense, and reputational damage.
For workers, these tools mean you don’t need to rely solely on your employer to ensure you’re paid fairly. The system is designed so that you can take action independently, confidently, and anonymously if needed.
What Should You Do If You Suspect Underpayment?
When underpayment is suspected, action should be taken promptly. Delays can increase arrears and potential penalties.
Workers should:
- Verify pay using an official calculator
- Raise concerns informally where possible
- Escalate through Acas or HMRC if unresolved
Employers who identify errors should correct them immediately and document the steps taken. Voluntary corrections can reduce enforcement outcomes if HMRC later becomes involved.
FAQs About HMRC Wage Checks and Minimum Wage Compliance
How much notice does HMRC give before a payroll check?
Usually none. HMRC often conducts wage checks unannounced to avoid manipulation of records.
Can an employer refuse access to HMRC officers?
No. Refusing access may be seen as obstruction and can result in further investigation or legal action.
What happens if I fail to provide payroll records?
Employers who can’t produce records risk immediate penalties and assumptions made in HMRC’s favour.
Does HMRC investigate small businesses too?
Yes, size doesn’t matter. Many inspections focus on small to mid-sized employers where underpayment risks are higher.
What if I accidentally underpay someone?
You must correct it immediately, pay any arrears, and may still face fines for carelessness.
Are unpaid internships legal in the UK?
Not usually. Most interns doing real work must be paid at least minimum wage.
What’s the difference between NMW and NLW in 2026?
NMW applies based on age and role; NLW is a higher rate for those 21+. As of April 2025, NLW starts at age 21.
