Since 6 April 2026, you must keep adequate records showing that every worker has received the annual leave and holiday pay to which they are legally entitled. Those records must be retained for at least 6 years from the date they were made. The Stockport accountants at U&W can help you review whether your payroll and accounting records provide a clear enough audit trail.
A leave calendar alone may not be sufficient. You should be able to show how much leave was earned, taken, carried forward and paid. Reliable payroll support for Stockport businesses can connect each leave entry to the correct holiday pay calculation and payslip.
Your payroll records should also agree with your wage costs, bank payments and accounting entries. Consistent bookkeeping services for businesses make it easier to identify missing or duplicated holiday payments before they become disputes.
What holiday records must you keep?
| Record | Information to retain |
|---|---|
| Holiday entitlement | The worker’s annual statutory and contractual entitlement |
| Holiday taken | Dates and amount of leave used |
| Holiday carried forward | Amount carried over and the reason |
| Holiday pay | Amount paid and how it was calculated |
| Pay components | Overtime, commission, bonuses or other elements included or excluded |
| Payments in lieu | Holiday paid when someone leaves employment |
| Rolled-up holiday pay | Percentage used and the separate amount shown on each payslip |
| Corrections | Changes made, the reason and the date of correction |
The rules do not prescribe one particular system. You can use payroll software, HR software, spreadsheets or another reliable process. What matters is whether the records are accurate, accessible and detailed enough to demonstrate compliance.
Keep the calculation, not just the final amount
A payslip showing £420 of holiday pay does not necessarily explain how you reached that figure. Your supporting record should show the pay period, applicable reference period and which earnings were included.
For example, imagine an employee receives a basic wage plus regular commission. You pay them during a week of annual leave but calculate the payment using only their basic salary. A record of the final payment exists, but it may also reveal that normal remuneration was not considered correctly.
For regular-hours workers, at least 4 weeks of statutory leave must generally be paid at the normal rate. Normal pay can include regular overtime, commission and payments linked to professional status or length of service. The remaining 1.6 weeks can be paid at the basic rate, although many employers use the normal rate for all statutory leave because it is easier to administer.
The guide to 5 payroll problems small employers can avoid explains why variable payments should be checked before payroll is finalised.
Record carried-over and unused leave
You should record how much leave is carried forward and why. Carry-over can arise because of family leave, sickness absence, contractual arrangements or because the worker was not given a reasonable opportunity to take their statutory holiday.
When an employee leaves, you must normally pay them for accrued statutory leave they have not taken. Record:
- The employee’s leaving date.
- Their entitlement up to that date.
- The amount of leave already taken.
- Any leave carried forward.
- The unused balance.
- The payment made through payroll.
Do not delete records when a worker leaves. The 6-year retention period runs from the date each record was made, not from the employee’s final working day.
The U&W guides to hiring your first employee and understanding P60 responsibilities provide further guidance on employer records.
Take extra care with irregular-hours workers
Holiday calculations can be harder where hours or pay vary. For irregular-hours and part-year workers, statutory holiday entitlement is generally accrued at 12.07% of hours worked during each pay period, subject to the statutory limit.
You may choose to use rolled-up holiday pay for qualifying irregular-hours and part-year workers. Where you do, it must normally be calculated at no less than 12.07% of total pay for the pay period and shown separately on the payslip.
Suppose a qualifying worker earns £500 during a monthly pay period. Rolled-up holiday pay calculated at 12.07% would be £60.35. Your records should show the £500 earnings figure, the percentage used and the separate £60.35 payment.
Rolled-up holiday pay should not be used for regular-hours workers. Software can automate the calculation, but why accounting software still needs professional oversight explains why automated entries still need checking.
Bring payroll, HR and bookkeeping together
Holiday requests may sit in an HR system while payment information sits in payroll. The resulting wage expense is then entered into your accounts. All 3 records should tell the same story.
Your process should include:
- Recording leave when it is approved and taken.
- Sending changes to payroll before the cut-off date.
- Retaining the calculation behind each payment.
- Checking payslips before they are issued.
- Backing up records securely.
- Restricting access to authorised people.
- Documenting corrections instead of overwriting them without explanation.
You can use the small business financial records guide, the UK bookkeeping checklist and guidance on keeping bookkeeping organised as your business grows to strengthen the wider record-keeping process.
Xero accounting and bookkeeping services can help connect payroll information with your accounting records. Management accounting services can also show how holiday accruals and staffing costs affect cash flow.
A UK corporation tax accountant can check that payroll expenses are reflected correctly in the company accounts. Directors may separately need a tax return accountant for individuals where their wider income requires Self Assessment.
Businesses considering UK business relocation services to Dubai should retain UK employment records for the required period even where operations or management later move overseas.
Frequently asked questions
How long must employers keep holiday pay records?
You must keep adequate annual leave and holiday pay records for at least 6 years from the date each record was made.
What details should holiday records include?
Your records should show entitlement, leave taken, leave carried forward, holiday pay, payments in lieu and the pay elements used in each calculation.
Can you keep holiday records in a spreadsheet?
Yes. There is no prescribed format. However, the spreadsheet must be accurate, secure, regularly updated and detailed enough to demonstrate compliance.
Do you need to keep records for former employees?
Yes. An employee leaving does not end the retention obligation. Keep each record until its individual 6-year retention period has expired.
Can you be fined for not keeping holiday records?
Yes. Failure to maintain adequate records can result in enforcement action and a fine. It can also make it much harder to defend a holiday pay complaint.
Review your holiday records now
Do not wait for a worker query or inspection to discover that your leave calendar and payroll figures do not agree. Contact U&W to review your holiday pay calculations, payroll records and 6-year retention process.
