As an employer, payroll is one of the most time-consuming and repetitive financial tasks. But, while it might not be exciting, it’s vital you carry out payroll correctly (and by that, we mean in line with HMRC guidelines) to ensure you’re meeting the legal obligations of your business. Not sure where to start? We’ve got you.
As bookkeeping and payroll professionals, we’re the go-to team for understanding essential compliance. Learn your payroll obligations in this guide.
Register as an Employer
If you haven’t already, you need to register as an employer with HMRC before setting up a payroll system. This is essential for any business that hires employees (including if you’re registered as a limited company and only hiring yourself).
Head to the government website to register as an employer.
If you work in the construction industry and hire contractors, learn more about CIS payroll.
After registering as an employer, you’ll receive your Pay As You Earn (PAYE) reference number. This allows you to start following the PAYE payroll system, which is key to compliance.
Record Your Employee’s Pay
You’ll need to carry out essential payroll tasks every month to meet PAYE guidelines. The tax month runs from the 6th of the month to the 5th of the next month – so, for instance, a tax month would be 6th April – 5th May.
Every time you pay your employees within the tax month, you’ll need to carry out the following tasks before their payday:
- Record their pay in your payroll system, including standard salary and any other pay, such as overtime.
- Work out the necessary deductions, including tax, National Insurance (NI), and pensions.
- Work out your NI contribution on employee earnings based on current thresholds.
- Submit a Full Payment Submission (FPS) to HMRC, which details employee pay and all deductions from their salary.
Pay What You Owe
In the month after payday, you’ll be told what you owe in NI contributions. If you’re paying online, you should view what you owe and pay HMRC by the 22nd of every month. For payments by post, the deadline is the 19th.
For employers who typically owe less than £1,500 a month, HMRC offers a system to pay every 3 months instead. If you can, this is a smart way to reduce admin while staying compliant with UK payroll laws. Speak to our team about how to pay quarterly.
Get to Grips With Pensions
Workplace pensions are a legal obligation in the UK for eligible employees. As an employer, it’s your job to enrol your employees in an approved pension scheme and make minimum contributions.
In general, employees aged 22 to state pension age who earn at least £10,000 per year must be automatically enrolled. Total minimum contributions are currently 8% of qualifying earnings, with at least 3% coming from the employer. Key pension payroll tasks include:
- Calculating contributions correctly
- Applying tax relief where appropriate
- Submitting payments to the pension provider on time
You’ll also need to write to all your employees (including those not eligible for pensions) explaining how your pension scheme works and the ins and outs of automatic enrolment. Make sure this is done within 6 weeks of their start date.
Year-End Reporting
At the end of the tax year (which runs from 6th April to 5th April the following year), make sure to wrap up your payroll tasks with your year-end reporting. You’ll need to submit your final FPS to HMRC, alongside an Employer Payment Summary (EPS) if required.
After year-end reporting, you’ll also need to provide your employees with their P60. This is a summary of their total pay and deductions throughout the tax year, and must be handed out by the 31st May.
We also recommend using the tax year-end to review benefits in kind, prepare P11D forms where applicable, and ensure Class 1A National Insurance is calculated correctly. This ensures you’re feeling confident of your compliance and helps you maintain a more organised payroll system.
Update Employee Information
Alongside your regular payroll tasks, you need to ensure all employee information is always up-to-date. If an employee changes address, updates their name, or amends their bank details, for instance, it needs to be reflected in your payroll system to avoid payment errors or compliance issues.
Complete Payroll Compliance Checklist
We’ve gone through a lot of tasks in this payroll guide – if you’re feeling overwhelmed, you’re not alone! Here’s a quick checklist of what you need to do to make payroll compliance easier:
Getting Started
- Register as an employer with HMRC
- Ensure you receive your PAYE reference number
- Set up a compliant payroll system
Each Payday (On or Before Payment Date)
- Record employee pay (salary, overtime, bonuses)
- Calculate deductions (income tax, NI, student loans, pensions)
- Calculate employer NI contributions
- Generate and issue payslips
- Submit a Full Payment Submission (FPS) to HMRC
Monthly (or Quarterly, if eligible)
- Review what you owe to HMRC for the previous tax month
- Pay PAYE and NI by the 22nd (or 19th if paying by post)
- Ensure pension contributions are submitted on time
Year-End
- Submit final FPS and EPS (if required)
- Issue P60 forms to employees by 31 May
- Review benefits in kind and prepare P11Ds
- Calculate Class 1A NI
Outsource Your Payroll Tasks
The easiest way to ensure compliance is to work with our team at Angel Bookkeeping & Payroll Services. We provide end-to-end payroll services, taking care of your essential payroll tasks so that you can focus on running your business.
Ready to tick a major task off your to-do list? Outsource your payroll to our team.