Bank transfer is one of the best ways to pay wages precisely because it creates a clear audit trail. But the bank statement on its own is only part of the story - what HMRC wants to see is the whole chain tying together. The four pieces that make up proof: - Payroll records: the Full Payment Submission (FPS) you sent to HMRC on or before each payday, showing gross pay, tax and National Insurance deducted, and the payment date. Your payroll software keeps these, along with the P60s at year-end. - Payslips: what you gave each employee, showing the same gross, deductions and net pay. - Bank statement and payment evidence: the bank statement or export showing each transfer out of the business account on the right date, matching the net pay on the payslip. If you pay staff in one bulk payment, keep the bulk payment schedule from the bank showing the split per employee. - Reconciliation: gross minus deductions should equal net pay, which should equal the transfer amount. That reconciliation - each piece agreeing with the others - is what stands up to a check. How long to keep it: GOV.UK's employer PAYE guidance says you must collect and keep these records and that they must show you have reported accurately, for 3 years from the end of the tax year they relate to. If your records are incomplete, HMRC may estimate what you owe and charge a penalty, so keep everything. Digital records are fine - there is no rule that they must be on paper. One practical tip: keep staff records up to date too - addresses, National Insurance numbers, tax code notices, starter and leaver forms. An HMRC enquiry often starts with the employee records and works outwards, so the payroll paperwork matters as much as the bank evidence.
