Setting Up Payroll (PAYE)
If you take on employees — or pay yourself a salary as a company director — you need to run payroll through HMRC's PAYE (Pay As You Earn) system. This means deducting Income Tax and National Insurance from wages before paying them, and reporting this to HMRC in real time. It sounds complex but with the right software it is very manageable. This pathway walks you through everything you need to set up and run payroll correctly.
Before you can pay any employee (or yourself a salary as a director), you must register as an employer with HMRC. You must do this before your first payday — not on it, and certainly not after it.
Register online at gov.uk/register-employer. You will need your business details and an estimate of how many employees you will have and how much you will pay them. HMRC will send you an Employer PAYE reference number and an Accounts Office reference number. Keep these safe — you will need them every time you deal with HMRC about payroll.
It can take up to five working days to receive your employer reference numbers, so register well in advance of your first payday. If you are in a hurry, you can call HMRC's employer helpline.
Once registered, you are responsible for deducting the correct amount of Income Tax and National Insurance from every payment you make to employees, paying this to HMRC, and reporting it in real time through Real Time Information (RTI) submissions.
Good to know
- Register at least two weeks before your first payday to allow time to receive your reference numbers
- Keep your Employer PAYE reference and Accounts Office reference in a safe, accessible place
- If you are a sole director paying yourself a salary, you still need to register as an employer
Watch out for
- Paying an employee before registering as an employer
- Confusing your personal UTR with your Employer PAYE reference — they are different numbers
- Not registering because you think the amounts are too small to matter — HMRC requires registration regardless of the amount
Ready for the next step?
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