How to Register as an Employer for PAYE: A Practical Guide

When you must register as an employer

You must register as an employer with HMRC when you start employing staff, and this applies even if you are only employing yourself, for example as the sole director of a limited company. In other words, a one-person company that pays its director a salary is an employer in HMRC's eyes and needs PAYE. The same applies if you take on subcontractors for construction work, which brings the Construction Industry Scheme into play alongside PAYE.

HMRC sets out specific circumstances that mean you must operate PAYE. You need to register if an employee is paid £96 or more a week, gets expenses and company benefits, is receiving a pension, has had another job, or has received Jobseeker's Allowance, Employment and Support Allowance or Incapacity Benefit. If any of these apply to even one member of staff, PAYE is not optional and you must operate it for your payroll.

Even where none of those triggers are met and you do not have to register, HMRC still expects you to keep payroll records. That means the record-keeping obligation exists whether or not you cross a registration threshold, so a very small or seasonal payroll is not a reason to keep nothing on file.

Registration itself is what unlocks your employer PAYE reference number and your PAYE Online account. You need both before you can report anything to HMRC, view what you owe, or send the submissions that keep your payroll compliant. It is therefore worth treating registration as the gateway task that everything else depends on.

The registration deadline: before your first payday

The single most important rule is timing. You must register before the first payday to get your employer PAYE reference number, which HMRC sends to you in a letter. Because that reference is needed to submit payroll information, leaving registration to the last minute risks missing your reporting obligations.

There is also an upper limit. HMRC states that you cannot register more than two months before you start paying people. That gives you a practical window: register once your first payday is reasonably close, but with enough time for the reference to arrive. HMRC provides separate guidance on when to expect your letter, so check that when planning.

If you genuinely need to pay an employee before your PAYE reference has arrived, HMRC's instruction is to run payroll, store your Full Payment Submission, and then send a late Full Payment Submission to HMRC once you have your reference. This keeps you compliant even when the paperwork lags behind the payday.

The practical takeaway is to work backwards from your first intended payday. Fix the date you will pay people, check HMRC's guidance on when to expect your registration letter, and register early enough within the two-month window that the reference should arrive in good time. Directors setting a monthly salary have the advantage of choosing their own payday, so there is rarely a good reason to leave registration until it is tight.

How to register and set up payroll, step by step

Registration is only the first task. HMRC frames setting up payroll as a sequence of steps, starting with registration and ending with paying HMRC the amounts you have deducted. Most limited companies can register online, and doing so also gives you a login for PAYE Online, which you use to manage your PAYE affairs and view what you owe.

Choosing payroll software is a decision worth making early. HMRC lists free and paid-for software that is recognised for reporting PAYE information online, and free payroll software is available for businesses with fewer than 10 employees. Whichever you pick, the software needs to record employee details, calculate pay and deductions, and report to HMRC, so match it to the size and complexity of your payroll before your first pay run.

The steps below follow HMRC's own order for setting up payroll. Working through them in sequence means you have the right reference, the right software and the right employee details in place before your first Full Payment Submission is due. Rushing any step, particularly collecting employee information, is where new employers most often trip up.

What running payroll involves under RTI

Once registered, you operate PAYE in real time. On or before each payday you must use payroll software to record each employee's pay, calculate the deductions, produce payslips, and report the figures to HMRC in a Full Payment Submission (FPS). This on-or-before-payday reporting is the core of Real Time Information (RTI).

The deductions you calculate include Income Tax and the employee's National Insurance, and you also work out the employer's National Insarance you owe on top. Depending on the employee, deductions can also include student loan repayments and pension contributions. Your software handles the calculations, but you are responsible for submitting the FPS on time.

There is a second report to be aware of. You must send an Employer Payment Summary (EPS) to HMRC if you have not paid any employees in a tax month, and the EPS is also how you claim certain reductions. Tax months run from the 6th of one month to the 5th of the next, which is the rhythm your payroll and payments follow.

RTI reporting is not only a monthly cycle. At the end of the tax year on 5 April you complete annual reports and prepare for the next tax year that starts on 6 April, which includes updating employee payroll records and applying any new rates. Building these year-end tasks into your calendar from day one prevents a rushed and error-prone April.

Deductions, thresholds and paying HMRC

PAYE collects Income Tax and National Insurance. For National Insurance in the 2026 to 2027 tax year, employees pay nothing on earnings up to £242 a week, then a rate applies between £242.01 and £967 a week, with 2% above £967 a week. Employers pay National Insurance too: the employer rate is 15% on earnings above the relevant threshold, with the employer band starting from £96 a week.

Note that the £96 a week figure appears twice for different reasons. It is the level at which you must register and operate PAYE for an employee, and it is also where the employer National Insurance band begins for 2026 to 2027. Your payroll software applies the correct rates automatically once you enter each employee's pay.

After you have reported pay and deductions, you pay HMRC what you owe. The FPS is due on or before payday; an EPS to claim reductions is due by the 19th of the following tax month; and payment to HMRC is generally due by the 22nd, or the 19th if you pay by post. Missing these deadlines can lead to late filing penalties unless you have a valid reason.

Payment to HMRC is usually made every month. However, small employers who expect to pay less than £1,500 a month can arrange to pay quarterly instead, which can ease cash flow and reduce admin for a very small payroll. Your software will still calculate and report each pay run, but the money can be settled on the agreed quarterly basis once that arrangement is in place.

Workplace pension duties run alongside PAYE

Becoming an employer brings a second legal obligation that sits next to PAYE: automatic enrolment into a workplace pension. According to The Pensions Regulator, your workplace pension legal duties begin on the day your first member of staff starts work, which is known as your duties start date. Even if you think you will not need to put anyone into a scheme, you still have duties.

You must automatically enrol staff who are aged 22 up to state pension age and earn over £10,000 a year, and pay contributions for them. The Pensions Regulator confirms the earnings trigger for automatic enrolment is £10,000 a year. The total minimum contribution is 8% of qualifying earnings, of which the employer must pay at least 3%, with the staff member making up the rest, though you can choose to pay more.

Because these duties start as soon as you employ someone, plan them at the same time as PAYE rather than afterwards. Even employers whose staff earn too little to trigger enrolment still have duties to assess their workforce and communicate with staff, so do not assume a small or single-person payroll is exempt from the process.

The Pensions Regulator provides a personalised duties timeline through an interactive tool that shows what you must do and by when, based on your circumstances. Using it early gives you a clear picture of assessment, enrolment and communication tasks so nothing is missed. Sole director companies with no other staff can be in a different position, so check your specific situation against the Regulator's guidance rather than assuming the rules apply or do not apply.

Conclusion

Registering as an employer for PAYE is a time-bound task rather than a box-ticking exercise. Register before your first payday, but no more than two months ahead, so your employer PAYE reference arrives in time to run payroll and file your first Full Payment Submission on or before the day you pay people. Remember that this applies even to a single director paying themselves through a limited company.

PAYE rarely travels alone. Once you are an employer you also have Real Time Information reporting, National Insurance to calculate and pay, and workplace pension auto-enrolment duties that begin the day your first employee starts. Treat them as one connected set of responsibilities from the outset. If you would like help getting company formation and payroll set up correctly, explore our start-up services or get in touch with our team.

Frequently asked questions