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Payroll1-2 hoursEasy

How to Set Up Payroll for Your Company

Step-by-step guide to registering as an employer and setting up payroll to pay yourself and employees.

What You'll Need

  • HMRC employer registration
  • Payroll software
  • Employee details (NI number, address, DOB)
  • Tax codes for employees
  • Company bank account

Step-by-Step Guide

1

Register as an employer with HMRC

Before your first payday, register online through your business tax account. You'll receive an employer PAYE reference.

Tips
  • •Register up to 4 weeks before first payment
  • •You'll get a PAYE reference (e.g., 123/AB12345)
  • •Accounts Office reference follows separately
2

Choose payroll software

Select HMRC-recognised payroll software to calculate tax/NI and submit Real Time Information (RTI). Can be basic or accounting package.

Tips
  • •HMRC Basic PAYE Tools is free (limited)
  • •AccountsOS handles payroll
  • •Must connect to HMRC for RTI
3

Set up employee records

For each employee (including yourself as director), enter personal details, tax code, NI number, start date, and salary.

Tips
  • •Get P45 from previous employer if applicable
  • •Directors have different NI calculation
  • •Starter checklist if no P45
4

Set up your payment schedule

Decide how often to pay: weekly, fortnightly, monthly, or annually. Directors often use annual payroll for simplicity.

Tips
  • •Monthly is most common
  • •Annual is simplest for directors
  • •Must be consistent within tax year
5

Run your first payroll

Calculate gross pay, deductions (PAYE, NI, student loan), and net pay. Software does the calculations for you.

Tips
  • •Check tax code is correct
  • •Review calculations before paying
  • •Keep payslip records
6

Submit Full Payment Submission (FPS)

Report payments to HMRC on or before payday using RTI. Software submits automatically if set up.

Tips
  • •Due on or before payday
  • •Late submissions trigger penalties
  • •Includes all payment details
7

Pay employees

Transfer net pay from company bank account to employee personal accounts. Keep records of all payments.

Tips
  • •Use bank reference for traceability
  • •Pay on consistent date
  • •Issue payslips
8

Pay HMRC

Pay any PAYE and NI deducted to HMRC by 22nd of following month (19th if not paying electronically).

Tips
  • •Monthly or quarterly payments
  • •Small employers may pay quarterly
  • •Set up Direct Debit for ease

Common Mistakes to Avoid

Not registering before first payday

Late RTI submissions

Using wrong tax code

Not paying HMRC on time

Frequently Asked Questions

Do I need to register as an employer if I only pay myself?

Yes, if you pay yourself a salary through your limited company, you must register as an employer with HMRC. This applies even if you are the only director and only employee. Registration should be done before your first payday.

How do I register as an employer with HMRC?

Register online through HMRC's PAYE registration service at least 2 weeks before your first payday. You will need your company UTR number and Companies House details. HMRC will send you an employer PAYE reference and Accounts Office reference by post.

What is Real Time Information (RTI) and when do I submit it?

RTI is the system for reporting payroll information to HMRC. You must submit a Full Payment Submission (FPS) on or before each payday, reporting what you have paid each employee. An Employer Payment Summary (EPS) is submitted if you have nothing to report or need to claim reductions.

When do I need to pay HMRC the PAYE and NI I have collected?

Monthly payers must send PAYE and NI to HMRC by the 22nd of the following month (or 19th if paying by post). Quarterly payments are available if your average monthly PAYE bill is under £1,500. Late payments incur interest and penalties.

Can I run payroll myself without an accountant?

Yes, you can run payroll yourself using HMRC's free Basic PAYE Tools or commercial payroll software. The software calculates tax and NI, generates payslips, and submits RTI reports to HMRC. For a single director, this is straightforward and takes just a few minutes each month.

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