Key takeaways
- You must register as an employer with HMRC before your first payday, and no more than two months before you start paying people.
- Every payday you send HMRC a Full Payment Submission (FPS) on or before the day you pay staff.
- PAYE and National Insurance owed for a tax month must reach HMRC by the 22nd if you pay electronically, or the 19th by post.
- In 2026/27 employer National Insurance is 15% on earnings above £5,000 a year (£96 a week), and the Employment Allowance is £10,500.
- You must auto-enrol staff aged 22 to State Pension age who earn over £10,000 a year, with at least 8% total contributions, 3% from you.
- At the year end give employees their P60 by 31 May and report expenses and benefits by 6 July.
Running payroll in the UK comes down to ten repeating steps: register with HMRC, set up software, collect employee details, work out pay and deductions, report to HMRC on or before payday, and pay HMRC by the 22nd of the next month. A few extra jobs come once a year. This guide uses the 2026/27 figures from HMRC’s rates and thresholds for employers, last updated 1 September 2026.
What are the 10 steps of the payroll process?
The ten steps split into set-up, every payday and the year end.
- Register as an employer with HMRC.
- Choose payroll software that is recognised by HMRC.
- Collect each new starter’s details.
- Set up a workplace pension and check who to auto-enrol.
- Record pay for the period.
- Calculate deductions: tax, National Insurance, student loans and pension.
- Give each employee a payslip.
- Send a Full Payment Submission (FPS) to HMRC on or before payday.
- Claim reductions with an Employer Payment Summary (EPS) and pay HMRC.
- Complete the year end: final FPS, P60s and benefits reporting.
Step 1: register as an employer
You must register as an employer before your first payday, so HMRC can issue your employer PAYE reference. You cannot register more than two months before you start paying people. Our guide to setting up PAYE covers the online form.
Step 2: choose payroll software
You need software that can send reports to HMRC in real time. HMRC offers free Basic PAYE Tools for employers with fewer than 10 staff; most businesses use commercial software or a bureau. Compare the options in payroll bureau vs software vs doing it yourself.
Step 3: collect new starter details
For each new employee you need their name, address, date of birth, National Insurance number and start date. Ask for their P45 from the last job, or have them complete HMRC’s starter checklist, so you can give them the right tax code. You also need to carry out right to work checks before they start.
Step 4: set up a workplace pension
Every employer has auto-enrolment duties from the first day of employment. You must enrol staff who are aged 22 to State Pension age and earn more than the earnings trigger.
| 2026/27 threshold | Annual | Monthly |
|---|---|---|
| Earnings trigger | £10,000 | £833 |
| Lower qualifying earnings | £6,240 | £520 |
| Upper qualifying earnings | £50,270 | £4,189 |
Minimum contributions are 8% of qualifying earnings, with at least 3% from you as the employer. See our auto-enrolment guide.
Step 5: record pay for the period
Record everything you pay: salary or wages, overtime, bonuses, commission, holiday pay and any statutory pay. In 2026/27 Statutory Sick Pay is £123.25 a week, and the National Living Wage is £12.71 an hour from 1 April 2026.
Step 6: calculate deductions
Your software works out the deductions, but you should know what they are.
| Deduction | 2026/27 rule |
|---|---|
| Income tax | 20% / 40% / 45% after the £12,570 personal allowance (Scotland has six bands) |
| Employee NI | 8% between £12,570 and £50,270, 2% above |
| Employer NI | 15% above £5,000 a year (£96 a week) |
| Student loan | 9% above the plan threshold, e.g. £29,385 for Plan 2 |
| Postgraduate loan | 6% above £21,000 |
The Employment Allowance cuts your employer NI bill by up to £10,500 a year if you qualify; see Employment Allowance. For a worked example, read how to calculate payroll taxes or use the employer NI calculator.
Step 7: give payslips
Every employee must get a payslip on or before payday. It must show gross pay, deductions and net pay, and the hours worked if pay varies with time worked.
Step 8: send the Full Payment Submission
You report pay and deductions to HMRC in an FPS on or before each payday. This is the core of Real Time Information. If you send it late or not at all, HMRC may issue a late filing notice and a penalty unless you have a reasonable excuse.
Step 9: send an EPS and pay HMRC
Tax months run from the 6th of one month to the 5th of the next. After each tax month:
- From the 10th: you can view what you owe online.
- By the 19th: send an EPS to claim reductions, such as statutory pay recovery or the Employment Allowance. You must send one if you paid nobody that month.
- By the 22nd: pay HMRC electronically, or by the 19th if you pay by post.
If you usually owe less than £1,500 a month, you may be able to pay quarterly. Ask HMRC’s payment helpline first; see HMRC telephone numbers.
Step 10: finish the tax year
The payroll annual reporting jobs are:
- send your final FPS of the year, on or before the last payday before 5 April
- give every employee on your payroll at 5 April a P60 by 31 May
- report expenses and benefits (P11D) by 6 July, unless you payroll them
- update employee tax codes for the new year from 6 April
Keep payroll records for at least three years after the end of the tax year they relate to. See payroll records.
Payroll checklist for each payday
- Starters and leavers added or removed
- Hours, overtime and bonuses entered
- Tax code changes from HMRC applied
- Pension deductions and opt-outs updated
- Payslips issued
- FPS sent on or before payday
- Payment to HMRC diarised for the 22nd
What to do now
If you are taking on your first employee, register with HMRC now if payday is within two months. If you already run payroll, check your software has the 2026/27 thresholds loaded, and note that Budget 2026 makes company cars and medical benefits payrollable from April 2027; see payroll changes for 2027-28.
Frequently asked questions
When do I have to register for PAYE?
Before your first payday, and no more than two months before you start paying people. You need your employer PAYE reference before you can send an FPS.
When is the FPS due?
On or before the day you pay your employees, every time you pay them. Late submissions can lead to penalties.
When must I pay PAYE to HMRC?
By the 22nd of the month after the tax month ends if you pay electronically, or the 19th if you pay by post. Tax months end on the 5th.
Do I need to run payroll if I only pay myself as a director?
Yes, if you pay yourself a salary at or above the lower earnings limit (£6,708 a year in 2026/27) or anyone has another job or pension. Many sole director companies still run payroll for a small salary.
What is the deadline for P60s?
You must give a P60 to every employee on your payroll on 5 April by 31 May.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 6 November 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.