Hiring your first employee?
How to register for PAYE
Taking on your first employee means setting up PAYE with HMRC. Here is what needs to happen before payday and what comes next.
Register as an employer on GOV.UKCheck whether you need to register
Businesses normally need to register as an employer with HMRC when they start employing staff. Registration sets up the PAYE scheme used to report pay and deductions such as Income Tax and National Insurance.
A limited company may also need to register when it starts paying a director, including where the director is the only person being paid. The current GOV.UK registration checker looks at pay and other circumstances, so use that service rather than assuming a low salary automatically removes the requirement.
Register at the right time
Register before the first payday so HMRC can issue the employer PAYE reference needed for payroll reporting. GOV.UK currently says you cannot register more than two months before you start paying people.
Do not leave registration until payroll is due. The PAYE reference is sent by letter and is not presented as an instant result, so build registration time into the hiring plan.
Register with HMRC
Follow the GOV.UK employer-registration route for the business type. Most limited companies with one to nine directors can register online; other businesses are directed through the appropriate process.
After registration, HMRC issues the employer PAYE reference and Accounts Office reference used by payroll software and PAYE Online. Keep both references securely and allow time for the letter to arrive before the first payroll is reported.
Choose how you will run payroll
Decide whether payroll will be run internally, through suitable payroll software, or by a payroll or accounting provider. Whichever route you choose, responsibilities, review and approval should be clear before the first pay run.
Payroll software needs to calculate the relevant pay and deductions and report payroll information to HMRC. Check HMRC’s current guidance and recognised-software options rather than choosing a system on price alone.
Agree the operating routine
- Who gathers and approves employee changes
- Who runs and reviews payroll
- Which software or provider will report to HMRC
- How payslips and payment files will be issued securely
- Who checks and pays amounts due to HMRC
Collect the employee information
Before paying a new starter, collect the personal, tax and start information needed to add them to payroll correctly. Use the employee’s P45 where available; if there is no P45 or more information is needed, use HMRC’s current starter checklist.
You will also need the agreed pay details and payment information, plus any relevant student-loan or other deduction details. Keep personal information secure and only collect what the business genuinely needs.
Core payroll onboarding information
- Full name, address, date of birth and National Insurance number
- Employment start date
- P45 or HMRC starter declaration
- Salary, pay frequency and other agreed pay details
- Student-loan and relevant deduction information
- Bank details for paying net wages
Run payroll and report to HMRC
For each payday, calculate gross pay, tax, National Insurance and any other deductions; submit the required payroll information to HMRC; provide the employee’s payslip; pay the net amount; and arrange payment of liabilities due to HMRC.
The normal reporting rule is to send the Full Payment Submission through payroll software on or before the employee’s payday. GOV.UK lists limited exceptions, so treat on-or-before payday as the standard timetable.
The core payroll sequence
- Calculate gross pay
- Calculate tax, National Insurance and other deductions
- Send the Full Payment Submission to HMRC on or before payday
- Provide a payslip on or before payday
- Pay the employee’s net wages
- Pay the amounts due to HMRC by the applicable deadline
Do not forget the other employer basics
PAYE registration is only one part of becoming an employer. Check the wider duties before the employee starts and use specialist employment or legal advice where the business needs it.
Related obligations to plan
- Workplace pension and automatic-enrolment duties
- Employers’ Liability insurance where required
- A written statement of employment particulars
- Right-to-work and any role-specific checks
This guide provides general information about PAYE setup. Payroll, pension and employment obligations depend on the people and arrangements involved, so use current government guidance and obtain specialist advice where appropriate.