Setting up a payroll | Tax Guidance | Tolley
HMRC Business Tax Account and PAYE
Outsourcing the payroll
In-house electronic payroll
Ceasing to be an employer
It may be stating the obvious, but to be an employer signifies that there are employees (or at least one employee). Depending on the employee(s) earnings, the employer may have to make certain statutory deductions from employees’ salaries and wages. Statutory deductions include income tax, national insurance contributions (NIC), student loan deductions (SLD) and attachment of earnings orders (AEO). These statutory deductions are all made via the payroll. The collection system for tax and NIC is called pay as you earn (PAYE).
Even though there may only be one employee, an employer needs to register with HMRC if the employee(s):
has another job
is receiving a pension (state or occupational)
has earnings equal to or more than the lower earnings limit (LEL) for national insurance
is receiving benefits in kind from the employer
Registration needs to be undertaken before the first payday. The registration process can take up to two weeks and registration cannot be made more than two months before employees are first paid. The timescale for registering should also take account of the time constraints associated with registering for PAYE Online (see below).
Registration can be by telephone or the internet. The information needed for registration is detailed in checklist 1 in Checklist ― setting up a payroll.
Partnerships and limited companies need to supply further information, as do other types of organisations under certain circumstances. This additional information and the specific circumstances for other organisations can be found integrated in the registration process on the