From the 1st of April 2026, HM Revenue and Customs (HMRC) will require payroll service providers to register as tax advisers, bringing them under the same regulatory framework as other professionals who deal with client tax affairs. The new rules aim to strengthen oversight and ensure minimum standards are met across the tax advice sector.
Why the Change?
The move is part of HMRC’s strategy to improve the quality and integrity of tax advice by ensuring that all professionals acting on behalf of clients, particularly in sensitive areas like payroll, are properly registered, monitored, and compliant with relevant regulations. According to HMRC, the change will help exclude those who consistently fail to meet standards and pose a risk to the tax system.
Who is Affected?
Anyone providing payroll services to external clients (i.e., not purely in-house payroll teams) will be classified as a tax adviser and required to register with HMRC. The rules apply whether the provider operates in the UK or overseas, and whether interaction with HMRC takes place via telephone, email, post, web portal, or any other means.
Importantly, simply supplying payroll software does not require registration, unless the provider also delivers services involving interaction with HMRC on a client’s behalf.
Registration and Eligibility
From April 2026, registration with HMRC will be mandatory, with at least a three-month transition period planned. Providers must supply:
- The adviser’s name and address
- Names of senior managers
- A statement of eligibility
- Any additional details requested by HMRC
To be eligible, payroll service providers must:
- Be fully compliant with their own tax obligations (no outstanding returns or debts)
- Not be under suspension or sanction from HMRC
- Not have a criminal conviction or be an insolvent or disqualified individual
- Be under AML (Anti-Money Laundering) supervision—either through a recognised professional body or HMRC’s Economic Crime Unit (ECU)
Currently, there is no designated professional regulatory body for payroll service providers, meaning many will need to register directly with the ECU to meet AML requirements.
Penalties for Non-Compliance
HMRC has outlined serious consequences for non-compliance. Any unregistered provider who continues offering payroll services or interacts with HMRC on behalf of clients may face:
- Immediate suspension
- Financial penalties starting at £5,000
- Prohibition from providing services until registration and standards are met
There will also be penalties for organisations or individuals who attempt to circumvent the rules.
Act Now to Prepare
With the changes due to take effect on 1st April 2026, payroll providers should begin preparing now. Reviewing your organisation’s tax standing, verifying AML compliance, and ensuring you’re ready for registration will be key to continuing lawful operations.
Further details will be published by HMRC in advance of the implementation date, but early planning will help ensure a smooth transition and avoid potential disruption.
