Payroll in the UK is built around PAYE, HM Revenue and Customs' system for collecting Income Tax and National Insurance directly from pay. An employer calculates each employee's deductions, reports them to HMRC on or before every payday, pays the balance across monthly, and on top of that funds employer National Insurance and a workplace pension contribution. The mechanics are the same whether you run one payslip or a thousand; what changes with scale is who operates it. This page sets out the statutory frame; HMRC's current guidance and your own scheme documents control in any specific case and nothing here is tax advice.
PAYE: registration and real-time reporting
An employer must register for PAYE if any employee earns at or above the weekly threshold, currently £96, receives expenses or benefits, has another job or a pension, or has been claiming certain benefits. PAYE covers salary, wages, tips, bonuses and statutory sick or maternity pay. The defining operational rule is timing: payments and deductions must be reported to HMRC on or before each payday, not at month end, and employers must tell HMRC when employees join or their circumstances change. Payment of what is owed runs monthly by default, and smaller employers expecting to pay under £1,500 a month can arrange quarterly payment with HMRC. Payroll records must be kept even where registration is not required.
National Insurance: the employer's own cost
National Insurance is two charges that look like one. Employees have contributions deducted from pay: for the 2026 to 2027 tax year a standard category A employee pays nothing on the first £242 a week, 8% on earnings between £242.01 and £967, and 2% above that. The employer then pays its own contribution on top of gross pay, not out of it, at 15% on earnings above the employer threshold for most category letters in the same year, with a matching 15% Class 1A charge on taxable expenses and benefits. Rates and thresholds vary by category letter and are reset each tax year, which is why every serious payroll tool takes the category letter, not a flat assumption, as its input.
Auto-enrolment: the pension duty starts on day one
Workplace pension duties begin on the day the first employee starts work, called the duties start date. Staff aged between 22 and State Pension age who earn at least £10,000 a year and normally work in the UK must be enrolled into a workplace pension scheme, with an employer contribution, and newly eligible staff must be enrolled and written to within six weeks of becoming eligible. Minimum contribution rates are set in law and are checked by The Pensions Regulator, and employees can opt out but the employer can never induce them to. For payroll operations this is a per-run assessment, since a pay rise or a birthday can make someone eligible mid-year.
Run it in-house, or hand it to a provider
HMRC-recognised payroll software, including free options aimed at small employers, makes in-house payroll lawful and workable at small headcounts; HMRC itself recommends no product over another. The alternatives are a bureau that calculates and files from your data, a fully managed service that owns the whole function, or, for companies with no UK entity at all, an employer of record that employs staff here and runs payroll as part of the package. The obligations never move: whoever operates the software, the employer named on the scheme remains responsible to HMRC for on-time reporting and correct deductions, so choose a provider on evidence of scope and price rather than on compliance promises.
Questions people ask about payroll in the uk
When does an employer have to register for PAYE?
As soon as any employee earns at or above the weekly threshold, currently £96, or receives expenses or benefits, has another job or pension, or has been claiming certain state benefits. Records must be kept even below the threshold.
What National Insurance does an employer pay?
For the 2026 to 2027 tax year, employer contributions run at 15% on earnings above the employer threshold for most category letters, plus Class 1A at 15% on taxable expenses and benefits. This is a cost on top of gross salary, not a deduction from it.
How often must payroll be reported to HMRC?
On or before every payday, through payroll software that files the information online. Annual reports follow at tax year end, and HMRC must be told when employees join, leave or change circumstances.
Who has to be put into a workplace pension?
Staff aged between 22 and State Pension age earning at least £10,000 a year who normally work in the UK. The employer must enrol them, contribute, and write to newly eligible staff within six weeks; duties start the day the first employee starts work.