Hiring your first employee feels like a big milestone. But with it comes a legal responsibility most new employers are not fully prepared for. PAYE, which stands for Pay As You Earn, is HMRC’s system for collecting income tax and National Insurance contributions from employees through their wages before they are paid.
As a UK employer, you deduct the tax, send it to HMRC, and your employee receives their net pay. That is the system in a nutshell. It has been in place since the 1940s and applies to the vast majority of businesses with staff on their books. But knowing the definition is just the start. The real question is: do you actually know what your duties are every single month as an employer running PAYE?
What Does PAYE Cover? Deductions Every Employer Must Make
Once you are registered, you need to make the correct deductions from your employees’ pay each time you run payroll. These are not optional. Every UK employer operating a PAYE scheme must apply it accurately on every pay date.
Below are the key deductions that every employer must understand and apply correctly.
Income Tax
Every employee is assigned a tax code by HMRC. This tells you exactly how much income tax to deduct from their wages. The personal allowance for 2025/26 is £12,570. Earnings above that threshold are taxed based on the rates below:
| Earnings | Tax Rate |
| Up to £12,570 | 0% (Personal Allowance) |
| £12,571 to £50,270 | 20% (Basic Rate) |
| £50,271 to £125,140 | 40% (Higher Rate) |
| Over £125,140 | 45% (Additional Rate) |
National Insurance Contributions
Alongside income tax, you must deduct employee National Insurance contributions (NICs) from their pay. You also pay employer National Insurance on top as an additional business cost. Both amounts go to HMRC together on the same deadline.
Other Deductions
PAYE payroll deductions can also include student loan repayments, workplace pension contributions, and any court-ordered attachment of earnings. All of these come out before the employee sees a single penny.
When Do Employers Need to Register for PAYE?
Not every employer needs to register straight away, but most do. Here is a quick reference table showing exactly when PAYE registration becomes a legal requirement for a UK employer:
| Trigger | Must Register? |
| Employee earns £96 or more per week | Yes |
| The employee has another job | Yes |
| Employee gets expenses or company benefits | Yes |
| Employee is receiving a pension | Yes |
| Employee receives Jobseeker’s Allowance | Yes |
| No employees are being paid | No |
You must register before your very first payday. HMRC will normally send your PAYE employer reference number within 5 to 10 working days of applying. Do not leave this until the last minute. If you are just starting out and setting up your business structure for the first time, our Company Formation service can help you get everything in order from day one, including getting ready for PAYE registration.
Key PAYE Forms Every UK Employer Must Know
Running PAYE means dealing with a set of important HMRC forms. Missing them or filing them late can trigger compliance issues fast. Each of these forms serves a specific purpose and must be issued or filed at the right time.
P45
A P45 is given to an employee the day they leave your company. It shows their total pay and tax deductions so far in the tax year. Their next employer will use it to set the correct tax code from the start.
P60
A P60 is an end-of-year certificate. You must give one to every employee by 31 May each year. It summarises their total earnings and all PAYE deductions made across the full tax year.
P11D
A P11D is filed with HMRC by 6 July each year. It reports any expenses and benefits given to employees outside of payroll, such as company cars or private healthcare. Staying on top of these forms is much easier when your bookkeeping is kept clean and up to date throughout the year, rather than scrambled together at year’s end.
New Starter Checklist
When a new employee joins without a P45, you need to collect a new starter checklist from them before their first payday. This helps you apply the right employee tax code from the very start. You do not send it to HMRC, but you must keep it for at least three tax years.
Reporting to HMRC Using Real Time Information (RTI)
Under Real Time Information (RTI), you must report pay and deductions to HMRC on or before every single payday. This is done through a Full Payment Submission (FPS) using your payroll software. If you paid no employees in a given tax month, you send an Employer Payment Summary (EPS) instead to tell HMRC there is nothing to report.
Missing RTI submissions can attract penalties quickly. Staying on top of this every month is one of the areas where our Payroll service takes the weight off your shoulders completely, handling submissions accurately and on time so you never have to worry about a missed deadline.
How and When to Pay Your PAYE Bill to HMRC
The deadline for paying HMRC online is the 22nd of the following tax month. If you pay by post, it must arrive by the 19th. Small employers who expect to owe less than £1,500 per month may qualify to pay quarterly. Late payments attract interest and fines. Set reminders and never miss a due date.
Should You Run PAYE Yourself or Work With a Payroll Expert?
Running PAYE yourself is possible, but it takes time and care. If HMRC reviews your records and finds them incomplete, you could face a fine of up to £3,000. That is a steep price for a small error.
This is where Vital Accountax’s Payroll Service can make a real difference. Our team manages your entire PAYE scheme, from registration to monthly RTI submissions, so you never fall behind. We also offer Bookkeeping to keep your records clean, self-assessment for directors and sole traders, and CIS Returns for construction businesses. Whether you run a limited company, a sole trader, or a partnership, we have payroll support tailored to your situation.
Final Thoughts
PAYE for UK employers need not be stressful. Know when to register. Make the right deductions. Report on time using RTI. Pay HMRC by the deadline. And keep your records clean for at least three years. If any part of that feels like too much to manage alone, Vital Accountax is here to help. Let our experts handle your employer payroll obligations so you can focus on growing your business.