Running United Kingdom payroll means operating PAYE, the HMRC system that collects income tax and National Insurance at source from every payslip. An employer must register for PAYE once any employee is paid £96 or more a week, and from the first payday onward it must report payments and deductions to HMRC on or before each payday under Real Time Information. For a US company hiring in Britain the surprises are structural: employer National Insurance is a real cost on top of salary, pension auto-enrolment is a legal duty rather than a perk, and the filing rhythm is per-payday, not quarterly. The figures below are HMRC's own for the 2025 to 2026 tax year.
PAYE and Real Time Information
PAYE is not an annual reconciliation; it is a live system. Payroll software calculates income tax and National Insurance each pay run using the employee's tax code, and the employer submits a Full Payment Submission to HMRC on or before the day staff are paid. Registration is required when any employee is paid £96 or more a week, receives expenses or benefits, or has another job or pension. Deductions can also include student loan repayments and pension contributions. Payments of the tax and National Insurance due go to HMRC monthly, though a small employer expecting to owe less than £1,500 a month can arrange to pay quarterly. Late or missing submissions generate automatic notices, so the reporting calendar is the first thing to get right.
What an employee costs on top of salary in 2025-26
The headline on-cost is employer Class 1 National Insurance at 15% on each employee's earnings above the secondary threshold of £96 per week, which is £5,000 a year. Employees separately pay 8% on earnings between the primary threshold of £242 per week and the upper limit, then 2% above it, deducted through payroll alongside income tax; the standard personal allowance is £12,570, with the basic rate of 20% applying to the next £37,700 of taxable income in England, Wales and Northern Ireland. Some employers can reduce their National Insurance bill with the Employment Allowance of £10,500, and large payrolls pay the Apprenticeship Levy at 0.5% with a £15,000 annual allowance. The National Living Wage for workers aged 21 and over is £12.21 an hour.
Statutory payments and pensions are employer duties
UK employment law attaches several payments to the payroll itself. Statutory Sick Pay runs at £118.75 a week for eligible employees; Statutory Maternity Pay is 90% of average weekly earnings for the first six weeks, then the lower of £187.18 or that 90% figure for the remainder of the paid period. Pension auto-enrolment obliges the employer to put any worker aged between 22 and State Pension age who earns at least £10,000 a year and normally works in the UK into a qualifying pension scheme, writing to them within six weeks of the day they meet the criteria, with contributions on both sides of the payslip. None of this is negotiable in the contract; these are floors set by statute, and payroll has to administer them from day one.
Own PAYE scheme or an employer of record
An overseas company has two workable routes onto a UK payslip. It can register a PAYE scheme itself, which does not require a UK subsidiary but does require someone to run compliant payroll software, watch the RTI calendar, administer auto-enrolment and answer HMRC correspondence. Or it can hire through an employer of record, whose UK entity already holds the PAYE scheme and pension arrangements, and pay a per-employee monthly fee for the service. The arithmetic usually favours an EOR for the first one to three hires and a directly operated scheme as headcount grows and the fixed cost of doing it properly spreads across more people. Either way the statutory costs above are identical; the choice only moves who administers them.
Questions people ask about united kingdom payroll
Does a US company need a UK entity to run UK payroll?
No. An overseas employer can register a UK PAYE scheme without incorporating locally, though it then carries the full reporting and auto-enrolment duties itself. Many use an employer of record instead so that an existing UK employer handles PAYE, National Insurance and pensions for a fee.
What does an employer pay on top of a UK salary?
For 2025-26, employer National Insurance at 15% on earnings above £5,000 a year, pension contributions under auto-enrolment for eligible staff, and the Apprenticeship Levy at 0.5% for large payrolls, plus any statutory payments such as sick pay at £118.75 a week when they fall due.
How often is UK payroll reported?
Every payday. Under Real Time Information the employer files a Full Payment Submission on or before each payment date, and pays the tax and National Insurance due monthly, or quarterly by arrangement if the expected bill is under £1,500 a month.
Is there a US-style at-will arrangement in the UK?
No. UK employment ends through notice, statutory minimums and, after a qualifying period, unfair dismissal protection, none of which payroll can override. Budget for notice periods and statutory entitlements as part of the cost of every hire.