How employers reclaim SMP from HMRC

Edited by Oliver Wakefield-Smith, Founder of Digital Signet. Last reviewed 23 June 2026.

Direct answer

How does the reclaim work?

92%standard reclaim, 109% for small employers

Employers report SMP through the monthly Full Payment Submission and reclaim 92% of the gross SMP paid through the Employer Payment Summary (EPS) in the same tax month. The reclaim offsets against PAYE and NI due. Where there is insufficient liability to offset, HMRC pays the balance in cash. Small employers reclaim 109% under Small Employers Relief for 2026/27.

Standard reclaim: 92%

The standard recovery rate is 92% of the gross SMP paid to the employee. The remaining 8% is the employer's contribution to the scheme. Employers also pay employer NI on the SMP itself: since April 2025 the Secondary Threshold has been 96 per week (5,000 a year), so the flat-rate 194.32 sits above it and attracts employer NI at 15% on the excess unless covered by the Employment Allowance.

Small Employers Relief: 109%

If your total Class 1 NI bill in the prior tax year was 45,000 or less, you qualify for Small Employers Relief. For 2026/27 the recovery rate is 109%: 100% of the SMP paid plus a 9% uplift to cover the employer NI on the SMP. That compensation rate rose from 3% to 8.5% in 2025/26 and to 9% from 6 April 2026 (SI 2026/201), reflecting the lower Secondary Threshold. For 2026/27 SMP totals near 9,000 per employee, the 9% uplift is roughly 810 per employee.

How the reclaim flows through payroll

FPS reports the SMP figure in the SMP year-to-date and pay-period fields.
EPS in the same tax month claims the 92% or 109% reclaim under the SMP recovered field.
The reclaim offsets the PAYE/NI due to HMRC in the next monthly payment.
If reclaim exceeds the liability, HMRC pays the balance in cash, typically within 30 days.

Advance funding

If your SMP outgoing in a month exceeds your PAYE/NI liability and you cannot wait for the cash refund, you can apply for advance funding via the GOV.UK form. HMRC pays the SMP up-front, then the FPS/EPS reconciles after.