Payroll for Small Business UK: How to Run It
Quick answer
To run payroll you register as an employer with HMRC, use payroll software to work out tax and National Insurance, and send a Full Payment Submission (FPS) to HMRC on or before each payday. You must give every employee a payslip and pay HMRC what you owe each month.
Running payroll: the key tasks and deadlines (2025/26)
| Task | Requirement or deadline |
|---|---|
| Report pay to HMRC | Send a Full Payment Submission (FPS) on or before each payday |
| Payslips | Give every employee a payslip on or before payday |
| What a payslip must show | Earnings before and after deductions, variable deductions such as tax and NI, and hours worked if pay varies by time |
| Payroll software | Use HMRC-recognised software that reports PAYE online |
| Free option | HMRC's Basic PAYE Tools is free for employers with fewer than 10 employees |
| Employer Class 1 NI | 15% on earnings above the Secondary Threshold (GBP 96 a week, GBP 417 a month, GBP 5,000 a year) |
| Employment Allowance | Eligible employers can reduce employer Class 1 NI by up to GBP 10,500 a year |
| No employees paid in a month | Send an Employer Payment Summary (EPS) instead of an FPS |
| EPS deadline | By the 19th of the following tax month to claim any reductions |
| Pay HMRC | By the 22nd of the following tax month (19th if paying by post) |
Step by step
- 1
Register as an employer and choose software
Register with HMRC as an employer to get your PAYE Online access, then pick HMRC-recognised payroll software. It must report PAYE online. Employers with fewer than 10 employees can use HMRC's free Basic PAYE Tools, though it does not produce payslips.
- 2
Record pay and work out deductions
On or before each payday, record each employee's pay and let the software work out Income Tax and National Insurance deductions, plus your employer Class 1 National Insurance on earnings above the Secondary Threshold.
- 3
Produce and give a payslip
Give every employee a payslip on or before payday. It must show earnings before and after deductions, the amount of any variable deductions such as tax and NI, and the hours worked if pay varies by time.
- 4
Send the Full Payment Submission (FPS)
Report the pay and deductions to HMRC in a Full Payment Submission on or before each payday. If you paid no employees in a tax month, send an Employer Payment Summary (EPS) instead.
- 5
Pay HMRC what you owe
Pay HMRC the tax and National Insurance by the 22nd of the following tax month (the 19th if paying by post). Send an EPS by the 19th to claim any reductions, such as the Employment Allowance.
- 6
Keep records
Keep payroll records of what you paid employees, deductions, reports and payments to HMRC, and employee leave and sickness. HMRC can ask to see them.
Running payroll means operating PAYE: every time you pay someone, you work out the tax and National Insurance, give them a payslip, and tell HMRC. The legal core is simple to state. You must send a Full Payment Submission to HMRC on or before each payday, and you must give every employee a payslip on or before payday. The steps above are the full cycle; the table is the detail at a glance. Figures are for the 2025/26 tax year.
You do not need an accountant to do this. HMRC-recognised payroll software does the calculations and the submissions for you, and HMRC's own Basic PAYE Tools is free for employers with fewer than 10 employees, though it does not produce payslips. On top of employee deductions, you also pay employer Class 1 National Insurance at 15% on earnings above the Secondary Threshold (GBP 96 a week), and eligible employers can offset up to GBP 10,500 of that with the Employment Allowance.
Taking on staff for the first time brings more than payroll: read taking on your first employee for the wider checklist, and auto-enrolment for employers for the workplace pension duties that run alongside every pay run. If you are weighing up which payroll or accounting tool to use, compare accounting software sets out the options for small businesses.
Figures are for the 2025/26 tax year and are taken from gov.uk; tax rules, rates and thresholds can change. This is general information, not financial, tax or legal advice.
Frequently asked questions
What is the easiest way to do payroll for a small business?
Use HMRC-recognised payroll software. It works out tax and National Insurance, produces payslips, and sends the Full Payment Submission to HMRC for you each payday. Employers with fewer than 10 employees can use HMRC Basic PAYE Tools for free, though it does not produce payslips.
Does HMRC have free payroll software?
Yes. HMRC's Basic PAYE Tools is free payroll software for businesses with fewer than 10 employees. It works out tax and National Insurance and sends reports to HMRC, but it cannot produce payslips, so you need another way to give employees those.
Can I do my own company payroll?
Yes. You can run payroll yourself using HMRC-recognised software, as long as you register as an employer, report pay on a Full Payment Submission on or before each payday, give payslips, and pay HMRC on time. Many small employers run it in-house.
Can I do payroll without an accountant?
Yes. There is no legal requirement to use an accountant. Payroll software automates the calculations and HMRC submissions. An accountant or payroll bureau can save time and reduce the risk of errors, but it is optional.
Can I run payroll for myself?
If you are a director paid through PAYE, you run payroll for yourself the same way as for any employee: report your salary on a Full Payment Submission on or before payday and pay any tax and National Insurance due. Sole traders do not put their own drawings through payroll.
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General information, not financial advice. Tax rules and figures can change; check the current position on gov.uk before acting.