By Anne and Lisa, the mother and daughter team at Acey Bookkeeping. ICB Level 3 qualified bookkeepers and certified Xero advisors with 40+ years of combined experience, based in Rochester, Medway, Kent. Last updated 17 July 2026.
The short answer (TL;DR)
Xero payroll is not sold separately in the UK. It is built into your Xero subscription. Every plan includes a set number of people at no extra cost (Ignite none, Grow 1, Comprehensive 5, Ultimate 10), and beyond that allowance you pay £1.50 per additional person paid per month on Ignite, Grow and Comprehensive, or £1 per additional person on Ultimate. So a business paying 5 staff on the Grow plan (£37 a month) pays £37 + (4 × £1.50) = £43 a month excluding VAT.
Here is the part almost nobody tells you: those included allowances never actually pay for themselves. On payroll costs alone, Grow works out exactly £7 a month cheaper than Comprehensive at every single headcount, and Ultimate does not become cheaper than Grow until you are paying 39 or more people. We show the maths below.
One more thing worth knowing today: Xero has confirmed UK prices are rising from 1 September 2026, so the numbers below are about to move.
How much does Xero payroll cost per month?
Xero prices payroll as an add-on to your main plan rather than as a standalone product. You pick an accounting plan, and payroll sits inside it. Here is what that looks like in 2026, with all prices excluding VAT.
| Plan | Plan price/month | People included in payroll | Each extra person | Cost for 5 people |
|---|---|---|---|---|
| Ignite | £16 | 0 (optional add-on) | £1.50 | £23.50 |
| Grow | £37 | 1 | £1.50 | £43.00 |
| Comprehensive | £50 | 5 | £1.50 | £50.00 |
| Ultimate | £65 | 10 | £1.00 | £65.00 |
New customers can usually claim 80% off for the first six months, or take one month free instead. That discount applies to the base plan only, not to the per person payroll charges, so your payroll add-on costs stay the same during the promotional period.
The detail that catches people out: you pay per person paid, not per employee
This is the single most misunderstood part of Xero payroll pricing, and it works in your favour more often than not.
Once you are past your included allowance, Xero’s terms charge you based on the number of people paid in a billing period, not the number of employees sitting on your payroll records. If someone is on your system but is not paid in a given month, they do not trigger a charge that month. For seasonal businesses this matters a lot. A Medway café that runs 12 staff through the summer and 5 through the winter is not paying for 12 people all year round.
The flip side is that leavers still count in the month you pay them, including a final part-month payment. And if you run weekly and monthly pay runs, a person paid in both is still one person paid, not two.
What does Xero payroll actually cost for a real business?
Headline per person pricing sounds cheap until you add it up. Here is what a typical Kent small business on the Grow plan actually pays, including the VAT that Xero does not quote.
| People paid | Plan | Monthly ex VAT | Monthly inc VAT | Yearly ex VAT |
|---|---|---|---|---|
| 1 (director only) | Grow | £37.00 | £44.40 | £444 |
| 3 | Grow | £40.00 | £48.00 | £480 |
| 10 | Grow | £50.50 | £60.60 | £606 |
| 25 | Grow | £73.00 | £87.60 | £876 |
For most small businesses, payroll adds somewhere between £3 and £35 a month on top of the plan. It is genuinely one of the cheaper payroll options in the UK market, particularly compared with dedicated payroll bureaux that often charge £4 to £8 per payslip.
Which Xero plan is cheapest for payroll?
Here is where the standard advice gets it wrong. Most guides present the plans as a payroll ladder: more staff, higher plan. The maths does not support that.
Run the numbers for any headcount and you get a consistent, slightly surprising result:
- Grow is always exactly £7 a month cheaper than Comprehensive. Comprehensive includes 4 more people (5 versus 1), which is worth £6 at £1.50 a head, but costs £13 more in plan fees. You lose £7 every month, at every headcount, forever.
- Comprehensive is never the cheapest plan for payroll. Not at 5 people, not at 50. There is no headcount at which its included allowance catches up.
- Ultimate only wins at 39 people paid. Below that, Grow is cheaper. At exactly 39 they tie at £94 a month, and from 40 upwards Ultimate’s £1 per person rate finally pulls ahead.
- Ignite is always £19.50 cheaper than Grow on payroll maths alone, because its lower base fee more than offsets having no included person.
| People paid | Ignite | Grow | Comprehensive | Ultimate |
|---|---|---|---|---|
| 3 | £20.50 | £40.00 | £50.00 | £65.00 |
| 10 | £31.00 | £50.50 | £57.50 | £65.00 |
| 25 | £53.50 | £73.00 | £80.00 | £80.00 |
| 39 | £74.50 | £94.00 | £101.00 | £94.00 |
| 50 | £91.00 | £110.50 | £117.50 | £105.00 |
So what should you actually do? Choose your Xero plan on the things that genuinely differ between tiers, then treat payroll as a flat £1.50 a head on top. In practice that means:
- Pick Ignite only if you raise fewer than 20 invoices and enter fewer than 10 bills a month. The 20 invoice cap is what forces most businesses off it, not payroll.
- Pick Grow if you invoice regularly. It is the right home for the large majority of Kent small businesses, and it stays the cheapest payroll option all the way up to 38 people paid.
- Pick Comprehensive if you need multiple currencies or financial health scorecards. Buy it for those features, not for the payroll allowance, because that allowance loses you money.
- Pick Ultimate if you need project tracking and KPI analysis, or if you are paying 39+ people.
That is the honest answer, and it is different from what the plan comparison table implies.
Are Xero payroll prices going up in 2026?
Yes. Xero has confirmed that UK subscription prices increase from 1 September 2026. The four plan names stay the same, but the base prices rise:
| Plan | Price now | From 1 Sept 2026 | Change |
|---|---|---|---|
| Simple | £7 | £7 | No change |
| Ignite | £16 | £18 | +£2 |
| Grow | £37 | £39 | +£2 |
| Comprehensive | £50 | £55 | +£5 |
| Ultimate | £65 | £70 | +£5 |
Xero has not announced a change to the per person payroll rates, so £1.50 (or £1 on Ultimate) should still apply. Two practical points. First, the increase hits existing subscribers as well as new ones, so this is not something you can avoid by staying put. Second, the multi-organisation discount is being removed from 1 September 2026, which matters if you run more than one company through Xero.
If you have been putting off moving to Xero, signing up before September and claiming the 80% new customer discount is the sensible play. Existing promo codes will continue to be honoured against the new pricing until they expire.
What is not included in the headline Xero payroll price?
The plan fee and the per person charge are not always the whole bill. Watch for these:
- VAT at 20%. Xero quotes every price excluding VAT. If you are VAT registered you reclaim it. If you are not, add 20% and use the real number.
- Payroll payments. Paying staff directly from Xero uses bill and payroll payments. Grow includes 5 a month, Comprehensive 10 and Ultimate 15, then it is £0.20 per additional payment. Most businesses avoid this entirely by exporting a bank payment file instead, which is free.
- CIS contractor returns. £5 a month as an optional add-on on Ignite, Grow, Comprehensive and Ultimate. Relevant for a lot of Medway construction firms. Note that subcontractor CIS calculations and reports are included as standard; it is only submitting contractor returns that costs extra.
- Expense claims. Grow covers 1 user, Comprehensive 5, Ultimate 10, then £2.50 per additional user per month.
- Pension provider fees. Xero handles auto-enrolment, but NEST, The People’s Pension and similar charge their own fees on top.
Does Xero do payroll, and is it HMRC recognised?
Yes on both counts. Xero Payroll appears on HMRC’s list of recognised payroll software for PAYE and Real Time Information (RTI). It calculates income tax, National Insurance and student loan deductions automatically, handles auto-enrolment pensions, and produces payslips, P60s and P45s. Staff can view payslips and book leave through the Xero Me app.
If you want the full walkthrough of how it works and how to set it up, we have covered that separately in our guide on whether Xero can do payroll and file with HMRC.
How do I add payroll to my Xero subscription?
Payroll is switched on from within your existing subscription rather than bought as a separate product:
- Log in to Xero and go to Subscriptions in your account settings to check which plan you are on.
- Open Payroll settings and enable payroll.
- Connect your PAYE credentials so Xero can file FPS and EPS submissions to HMRC.
- Add your employees with their tax codes, NI numbers and pay rates.
- Run your first pay run. Billing for the extra people starts from the period in which they are paid.
The charges for people beyond your included allowance appear on the following month’s invoice, alongside any other usage charges, rather than being taken upfront.
Is Xero payroll worth it, or should you outsource payroll?
At £1.50 a head, the software is cheap. The cost of payroll is rarely the software.
The expensive parts are the mistakes: a wrong tax code that quietly under-deducts for months, an auto-enrolment assessment that did not happen, a leaver paid without a P45, a missed RTI deadline.
On that last one, HMRC is more forgiving than most guides suggest, and it is worth knowing exactly where the line is. Your first late Full Payment Submission in a tax year does not attract a penalty, and neither does an FPS filed within 3 days of payday. After that, late filing penalties run monthly by employer size:
| Employees | Penalty per month |
|---|---|
| 1 to 9 | £100 |
| 10 to 49 | £200 |
| 50 to 249 | £300 |
| 250 or more | £400 |
So a single slip usually costs nothing. The risk is a pattern of slips, and a pattern is exactly what you get when payroll is the job you do last thing on a Friday. Payroll errors also have a habit of upsetting the one group of people you cannot afford to upset.
So the real comparison is not Xero versus a payroll bureau. It is Xero on its own versus Xero run properly by someone who does this every week. We use Xero Payroll for our own clients precisely because it is good software. What we add is making sure the tax codes are right, the submissions actually go, the pensions are assessed, and you are not the one remembering it on the 28th of the month.
For most small businesses, the honest maths looks like this: Xero payroll costs you £40 to £70 a month, and the hour or two a month you spend running it yourself costs you considerably more than the difference between doing it alone and having a bookkeeper do it. If you are weighing that up more broadly, our guide on Xero pricing for 2026 breaks down every plan, and how to reconcile in Xero covers the other job that eats small business time.
Get your Xero payroll set up properly
Acey Bookkeeping is a mother and daughter team of ICB qualified bookkeepers and certified Xero advisors, based in Rochester and looking after small businesses right across Medway and Kent. We will tell you which plan you actually need (usually a cheaper one than you expect), get payroll set up correctly with HMRC and your pension provider, and run it every month so you never think about RTI deadlines again.
Frequently asked questions
How much does Xero payroll cost in the UK?
Xero payroll costs £1.50 per additional person paid per month on the Ignite, Grow and Comprehensive plans, and £1 per additional person on Ultimate, on top of your plan fee. Each plan includes some people already: Ignite (£16 a month) includes none, Grow (£37) includes 1, Comprehensive (£50) includes 5 and Ultimate (£65) includes 10. All prices exclude VAT.
Is Xero payroll included in the subscription?
Partly. Every plan except Ignite includes a set number of people at no extra cost: 1 on Grow, 5 on Comprehensive and 10 on Ultimate. Beyond that allowance you pay £1.50 per person per month (£1 on Ultimate). On Ignite, payroll is an optional add-on with no people included.
Can you buy Xero payroll on its own?
No. Xero does not sell a payroll-only plan in the UK. Payroll is built into the accounting subscription, so you need an Ignite, Grow, Comprehensive or Ultimate plan to use it.
Which Xero plan is cheapest for payroll?
Grow is the cheapest realistic option for most businesses and stays cheaper than Comprehensive at every headcount, by exactly £7 a month. Ultimate only becomes cheaper than Grow once you are paying 39 or more people. Ignite is cheaper still on payroll maths, but its 20 invoice per month cap rules it out for most trading businesses.
Does Xero charge per employee or per person paid?
Per person paid. Beyond your included allowance, Xero bills on the number of people actually paid in a billing period, not the number of employees on your records, so staff who are not paid in a given month do not trigger a charge that month.
Are Xero payroll prices increasing in 2026?
Xero base plan prices rise from 1 September 2026: Ignite to £18, Grow to £39, Comprehensive to £55 and Ultimate to £70. The per person payroll rates of £1.50 and £1 have not been announced as changing. The increase applies to existing subscribers as well as new ones.
Is Xero payroll HMRC recognised?
Yes. Xero Payroll is on HMRC’s list of recognised payroll software for PAYE and RTI submissions. It handles auto-enrolment pensions and files Full Payment Submissions and Employer Payment Summaries directly to HMRC.
