Estimated reading time: 3 minutes
Introduction
Taking on your first employee is an exciting milestone for any business, but it also brings new responsibilities. One of the most important is operating Pay As You Earn (PAYE) correctly.
PAYE is HMRC’s system for collecting Income Tax and National Insurance contributions directly from employees’ pay. As an employer, you’re responsible for making the correct deductions, reporting payroll information to HMRC, and paying the amounts due on time.
Key Points at a Glance
- Most employers must register with HMRC before paying employees.
- PAYE collects Income Tax and National Insurance from employees’ wages.
- Payroll information is normally reported to HMRC on or before each payday.
- Employers must keep accurate payroll records.
- You may also have responsibilities for workplace pensions and statutory payments.
What is PAYE?
PAYE (Pay As You Earn) is HMRC’s system for collecting Income Tax and National Insurance from employees as they are paid. PAYE can include other payments and deductions, such as:
- Student loan repayments.
- Workplace pension contributions.
- Statutory Sick Pay (SSP).
- Statutory Maternity, Paternity or Adoption Pay.
- Other authorised deductions where appropriate.
When Do You Need to Register as an Employer?
You will normally need to register as an employer with HMRC before your first payday if any employee:
- Earns £96 or more per week.
- Receives expenses or company benefits.
- Has another job.
- Receives a pension.
Running Your Payroll – What does it include?
- Calculate employees’ pay.
- Deduct Income Tax.
- Deduct employee National Insurance.
- Calculate employer National Insurance.
- Make pension and other deductions where applicable.
- Produce payslips.
Reporting to HMRC
Payroll reporting is completed using Real Time Information (RTI). In most cases you must report payroll information on or before employees are paid.
Paying HMRC
After submitting payroll information, you’ll pay HMRC the Income Tax, National Insurance and other deductions collected. Most employers pay monthly.
Keeping Payroll Records – Information we will keep.
- Employee details.
- Payments made.
- Tax and National Insurance deductions.
- Statutory payments.
- Pension deductions.
- Payroll reports.
How We Can Help
We can register you as an employer, process payroll, submit RTI returns, calculate deductions and help keep your business compliant with HMRC requirements.
Further Reading (HMRC)
- PAYE and Payroll for Employers – https://www.gov.uk/paye-for-employers
- PAYE Online for Employers – https://www.gov.uk/paye-online
- Find Payroll Software – https://www.gov.uk/payroll-software
- Register as an Employer – https://www.gov.uk/register-employer
Disclaimer
This article is intended as general guidance only and is based on HMRC guidance available at the time of writing. Tax legislation and HMRC guidance may change, and individual circumstances differ. Please contact us if you require advice specific to your situation.
Last reviewed: July 2026
