Pay As You Earn (PAYE) is the system HMRC uses to collect Income Tax and National Insurance from employees through their wages. As a small business owner, this means you deduct tax and National Insurance from pay before employees receive it, then pass those amounts on to HMRC.
However, not every small business automatically needs to register for PAYE. Whether you need to register depends on how much you pay, who you pay, and whether you provide benefits.
If your business employs staff, or if you pay yourself a salary as a director (even if you’re the only person in it), you’ll usually need to set up PAYE and run a payroll.
We’re uncovering all you need to know about company PAYE registration and how to register for PAYE with our guide below. Read on.
What does it mean to register for PAYE?
Registering for PAYE means that you, as a small business owner, will be allowed to legally deduct Income Tax and National Insurance from employees’ pay and report this information to HMRC through payroll submissions.
Let us take this off your hands. We can help with PAYE registration and payroll at Accountancy Solutions. Talk to our team to find out more.
Who needs to register for PAYE?
Your small businesses will need to register for PAYE as soon as you start paying people. This includes micro and small businesses, startups, and one-person limited companies. It doesn’t matter if you only have one or a couple employees; once the threshold is met, you are required to register employees for PAYE.
Do I need to register for PAYE as an employer?
Yes, it is likely you will need to register for PAYE as a small business owner – whether you work alone or with employees. You must register for PAYE with HMRC before your first payday if you pay staff above the threshold.
What is the PAYE threshold for employers?
Employers must register staff who earn £96 or more a week (£417 a month or £5,000 a year). The threshold also accounts for staff benefits, if employees have other jobs, or receive a pension
When do you register for PAYE as an employer?
You must register for PAYE as an employer if your employee meets the following criteria:
If you pay above the threshold
Any employee earns at or above the weekly secondary threshold. This is currently £123 per week.
If you run a limited company
You pay yourself a salary as a director (even if you’re the only employee)
If you provide taxable benefits
You offer benefits or expenses that need reporting. This includes things like company cars and health insurance.
If you employ someone with other income
This is when an employee already has another job or receives a pension.
If you use construction subcontractors
If you operate in construction, you may need to register due to CIS rules.
How to register PAYE as an employer
You can set up PAYE through the HMRC website. The key is make sure you apply in a timely manner. Here’s how you do it:
- Register with HMRC: Complete employer registration before your first payday.
- Set up payroll: Calculate pay, tax, and National Insurance deductions.
- Submit reports: Send payroll information to HMRC each time you pay staff.
- Provide payslips: Issue payslips to employees (and yourself, if applicable).
| What to consider: HMRC can take up to 15 working days to issue your PAYE reference number. You can register up to two months in advance, which is the right move for a new small business preparing to hire employees or start paying directors. |
Do I need to register for PAYE as a director?
Yes, if you run a limited company and pay yourself a salary, your company must be registered for PAYE. This is true even if you’re the only director and employee.
You are technically both employer and employee, meaning you must run payroll, calculate deductions, and report pay to HMRC before each payday. The same applies if you receive taxable benefits through the company.
When do I not need to register for PAYE as a director?
You won’t need to register for PAYE if your director’s salary is lower than the NI threshold and no benefits are provided. Once your salary goes above the relevant threshold, PAYE reporting is still needed.
However, many small business directors choose to run PAYE even at low salary levels for compliance and record-keeping reasons.
When to register for PAYE as a director
As a director, you must register before the first payday. This will look like:
- Registering online or by phone with HMRC.
- HMRC will issue a PAYE reference number.
- Registration must be completed within two months of paying your first salary.
Do I need to register for PAYE if I’m a sole trader?
You will only need to register for PAYE if you employ someone else and they meet the PAYE criteria. Sole traders don’t need PAYE to pay themselves, as they take profits rather than a salary.
PAYE vs Payroll: what’s the difference?
As a small business owner, you will need to know the difference between PAYE and Payroll.
Payroll: This is the full process of paying people. This includes calculating wages, issuing payslips, and keeping records, including things like sick days.
PAYE: This is the HMRC system within payroll that handles Income Tax and National Insurance reporting.
Technically, you can set up payroll software without being registered for PAYE, but until you’re enrolled with HMRC, you can’t legally submit payroll data or deduct tax.
Registering for PAYE means you’re officially signed up to HMRC’s system and ready to report employee pay correctly.
| Tip: It’s a good idea to keep payroll records to note sick days, annual leave, and the hours your employees work. Keeping these up to date means that you can ensure you’re paying your staff correctly. Similarly, good bookkeeping will make life easier if HMRC ask to see any records. |
[H2] Bookkeeping for PAYE
Bookkeeping is an essential part of any business – and this includes keeping records for PAYE (for yourself or your employees). At Accountancy Solutions, our dedicated team of experts can take it off your hands. Contact us to get started.
And, make sure to find out more about bookkeeping for small businesses with our guide.
We hope this guide on registering for PAYE as an employer was helpful! Next, find out about capital gains tax with our handy article here.