PAYE Registration: Complete Guide for New Employers

PAYE registration is the step that turns a business into an employer in HMRC's eyes. Once registered, you deduct Income Tax and National Insurance from your employees' pay, report it to HMRC every time you pay them, and pay it over each month. Whether you are hiring your first member of staff or paying yourself a director's salary through your own company, getting PAYE registration done in time is a legal requirement. This guide explains when you must register, how the process works and what to set up before your first payday.

What is PAYE?

Pay As You Earn (PAYE) is HMRC's system for collecting Income Tax and National Insurance from employment. As an employer, you work out each employee's deductions using their tax code, take them off their pay, and pass them to HMRC along with your own employer National Insurance contributions. Student loan repayments and some other deductions also go through PAYE.

Since 2013, PAYE runs on Real Time Information (RTI): every time you pay staff, your payroll software sends HMRC a report on or before the payment date.

Do you need PAYE registration?

You must register as an employer if any of your employees, in the current tax year:

• are paid £96 or more a week (the 2026 to 2027 threshold shown on GOV.UK)
• get expenses or benefits
• have another job or a pension

Directors count as employees of their company for PAYE. So a one-person limited company that pays its director a salary at or above the threshold needs PAYE registration, even though there are no other staff. If you only pay yourself dividends, or a salary below the threshold with no benefits and no other job, you may not need to register, but you should check rather than assume.

Even if nobody pays tax

Some employees earn less than their Personal Allowance and pay no Income Tax. You still need to register and report their pay, because the threshold for registering is lower than the point where tax starts.

When to register

You must complete PAYE registration before your first payday. You cannot register more than two months before you start paying people. HMRC can take several working days to send your employer references, so do not leave it until the week of payday.

How PAYE registration works

Step 1: Get your details ready

For a limited company you will need the company name, registration number and Corporation Tax UTR, the registered office address, and the directors' details. Sole traders need their National Insurance number and UTR. You will also need the date of your first payday and how many people you expect to pay.

Step 2: Register online

Most employers complete PAYE registration online through their HMRC business tax account. You can register yourself, or your accountant can register on your behalf as your agent.

Step 3: Receive your references

HMRC sends you two important references:

• Employer PAYE reference (also called your ERN), in the format 123/AB45678. You need it for payroll software, pension schemes and some employment checks.
• Accounts Office reference, a 13-character reference you use when paying HMRC.

Keep both safe. You will use them for as long as you employ people.

What to set up before your first payday

Payroll software

You must report to HMRC through RTI-compatible payroll software. HMRC lists recognised options, including some free basic tools for employers with fewer than ten employees. Many accountants run payroll for you instead.

Starter details

For each new employee, collect their P45 from their previous job, or ask them to complete HMRC's starter checklist if they do not have one. This tells you which tax code to use until HMRC sends an update.

Right to work checks

Before someone starts, you must check they have the right to work in the UK and keep a record of the check. Getting this wrong can lead to large civil penalties.

Employer's liability insurance

Most employers must have employer's liability insurance from the day they take someone on, covering at least £5 million, from an authorised insurer. There are limited exceptions, such as some family businesses and companies whose only employee is the owner who holds at least half the shares.

Workplace pension

Under automatic enrolment, you must enrol eligible staff into a workplace pension and pay employer contributions. Your duties start on the day your first employee starts, and you must complete a declaration of compliance with The Pensions Regulator within five months.

Minimum wage

Every worker must be paid at least the National Minimum Wage or National Living Wage for their age, which usually rises each April. Check the current rates before you agree pay.

Running payroll each month

Once PAYE registration is done, the monthly routine is:

1. Calculate pay and deductions using each employee's tax code and National Insurance category.
2. Give payslips to every employee, on or before payday.
3. Send a Full Payment Submission (FPS) to HMRC on or before each payday.
4. Send an Employer Payment Summary (EPS) by the 19th of the following tax month if you need to claim allowances or report that you paid nobody.
5. Pay HMRC by the 22nd of the next tax month if paying electronically, or the 19th by post. Small employers with an average monthly bill under £1,500 can apply to pay quarterly.

Employer National Insurance and the Employment Allowance

From April 2025, employer National Insurance is 15% of earnings above £5,000 a year per employee. The Employment Allowance can reduce your bill by up to £10,500 a year. You claim it through your payroll software. It is not available to a limited company where the only employee paid above the secondary threshold is a director, so one-person companies usually cannot claim it.

PAYE registration for a one-person company

Many small limited companies register for PAYE only to pay the director. The question then is how much salary to take, because each level has a different result:

• Below the Lower Earnings Limit: no PAYE registration may be needed, but the director does not build up qualifying years for the State Pension through the salary.
• At or above the Lower Earnings Limit but below £5,000: the year counts towards the State Pension, and no employer National Insurance is due.
• Above £5,000: employer National Insurance at 15% applies on the excess, and with no other staff the company usually cannot claim the Employment Allowance to cover it.
• Up to the Personal Allowance of £12,570: no Income Tax for the director, though employee and employer National Insurance may apply above their thresholds.

Salary is deductible for Corporation Tax, so the right figure depends on your profits, whether you have other income, and how much you take as dividends. It is worth recalculating each April, because thresholds and dividend tax rates change. Once a salary is set, the company must run payroll and file an FPS for every payment, even if it is the same amount each month.

Year-end tasks

At the end of each tax year on 5 April, you send your final FPS for the year, give every employee still working for you a P60 by 31 May, and report any expenses and benefits by 6 July, usually on forms P11D and P11D(b). Class 1A National Insurance on those benefits is due by 22 July.

Common PAYE registration mistakes

• Registering after the first payday, which leaves the first FPS late.
• Paying a director a salary without registering, assuming a one-person company does not need PAYE.
• Using the emergency tax code for longer than needed because starter information was not collected.
• Forgetting automatic enrolment because the first employee is part time.
• Claiming the Employment Allowance when the company is not eligible.

Our guide to PAYE compliance and penalties covers what happens when payroll goes wrong, and how to avoid it.

Keeping payroll records

Employers must keep payroll records for at least three years from the end of the tax year they relate to. That includes pay and deductions, expenses and benefits, statutory payments such as sick pay and maternity pay, and leave records. HMRC can check them, and they are often needed to answer employees' questions later.

Stopping as an employer

If you stop employing people, tell HMRC through your final FPS or an EPS, so your PAYE scheme can be closed and you are not chased for returns. If you only pause, for example a seasonal business, you can tell HMRC you will not be paying anyone for a period instead.

PAYE registration checklist

• Check whether anyone you pay meets the registration conditions.
• Complete PAYE registration before the first payday, and not more than two months before.
• Keep your employer PAYE reference and Accounts Office reference safe.
• Set up RTI payroll software, starter details and right to work checks.
• Arrange employer's liability insurance and a workplace pension.
• Send an FPS on or before every payday and pay HMRC by the 22nd.

HMRC's guidance is on GOV.UK: register as an employer and PAYE and payroll for employers.

Get your PAYE registration sorted

We register your business as an employer with HMRC, check whether you can claim the Employment Allowance, and help you set up payroll before your first payday. See our PAYE registration service for details.