When do I need to register as an employer for PAYE?

You must register as an employer before your first payday. If you are a director taking a salary, you are an employee of your own company and must register. You do not need to register if you only pay contractors (not employees).

How do I register as an employer with HMRC?

Register online at gov.uk/register-employer. You will receive a PAYE reference number and an Accounts Office reference number, which you need to set up payroll software and make payments to HMRC.

What is Real Time Information (RTI) for PAYE?

Real Time Information (RTI) means you must report payroll information to HMRC on or before each payday, rather than annually. This is done automatically by payroll software such as Xero, QuickBooks or FreeAgent.

Do I need to auto-enrol employees into a pension?

Yes. Employers must automatically enrol eligible employees (aged 22–66, earning over £10,000 per year) into a workplace pension and contribute at least 3% of qualifying earnings. You must also enrol yourself if you are a director taking a salary above the threshold.

What is the Employment Allowance?

The Employment Allowance lets eligible employers reduce their annual National Insurance bill by up to £10,500 (2025/26). Most small businesses qualify, but companies where the sole employee is also a director do not.

How to Set Up PAYE for Your First Employee (UK, 2026)

Last updated May 2026Reviewed against UK gov.uk sources

PAYE (Pay As You Earn) is the system through which UK employers deduct income tax and National Insurance from salaries and send them to HMRC each month. You must register before the first payday — but no more than 2 months before. Setting up properly takes about an hour; running monthly payroll thereafter is 10 minutes with the right tool.

Direct answer

Hiring your first person — including yourself as a director taking a salary — means registering as an employer with HMRC, choosing payroll software, and reporting in real time. Here's the full process. Use the key facts, step list and official source links on this page to confirm the decision before you spend money or register anything.

Cost to register: £0
Register by: Before first payday
Reporting: RTI, on/before payday
Employer NI rate: 15% (2025/26)

Checklist

Quick checklist

Confirm you need to register (vs paying contractors)
Register at gov.uk/register-employer
Receive PAYE and Accounts Office references
Choose payroll software
Collect employee's P45 / starter checklist + right to work
Issue written employment particulars by day one
Run first FPS on or before payday
Pay HMRC by the 22nd of next month

Section 01

When you must register as an employer

You're paying anyone more than £125/week (the Lower Earnings Limit).
You're paying anyone who already has another job.
You're paying anyone who receives a pension.
You're a director paying yourself a salary above the secondary threshold (£5,000/year in 2025/26).
You're providing expenses or benefits.

Section 02

Step 1 — Register as an employer with HMRC

01
Go to gov.uk/register-employer
Pick the right route — limited company, sole trader employing staff, or partnership.
02
Sign in to your Government Gateway
Use the same account you use for Corporation Tax / Self Assessment.
03
Provide your details
Trading name, address, first payday, expected number of employees, NI numbers if you have them.
04
Wait for your PAYE reference and Accounts Office reference
Two codes arrive by post within 15 working days. You can't file RTI without them.

Section 03

Step 2 — Pick payroll software

All UK payroll must be filed digitally under Real Time Information (RTI). The good news: most modern payroll tools are free for very small employers.

HMRC Basic PAYE Tools — free, ugly, fine for one employee with no complications.
BrightPay (Thesaurus) — free for up to 3 employees, paid above. Most popular for small UK employers.
Xero Payroll — £6/month, integrates with bookkeeping.
QuickBooks Payroll — £4/month per employee, integrates with bookkeeping.
Sage Payroll, IRIS, Moneysoft — all RTI-compliant.

Section 04

Step 3 — Set up the employee

Get their P45 from previous employer, OR a completed starter checklist.
Confirm right to work — passport / share code / settlement status.
Issue a written statement of employment particulars on or before day one (legally required).
Enrol in pension if they earn over £10,000/year (auto-enrolment).
Add to payroll software with NI number, tax code, pay rate, start date.

Section 05

Step 4 — Run the first payroll

01
Enter hours or salary
Software calculates tax, NI, pension and student loan deductions automatically.
02
Submit the Full Payment Submission (FPS)
Must be sent to HMRC on or before payday.
03
Pay the employee
Bank transfer the net amount. Issue a payslip (legally required — itemised).
04
Pay HMRC
Income tax + employee NI + employer NI by the 22nd of the following month (19th if paying by cheque).
05
If no one was paid that month
Send an Employer Payment Summary (EPS) instead, or HMRC chases you for payment.

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Common questions

How to set up PAYE for your first employee