The moment your company pays anyone a salary — including you as a director — you may need to operate PAYE (Pay As You Earn), HMRC's system for collecting income tax and National Insurance from wages. Even a small director's salary usually means registering as an employer and filing payroll reports each time you pay. This guide explains when PAYE is required, how to set it up, and your ongoing obligations.
Payroll & PAYE Key Facts 2026
- Register as employer before the first payday (allow up to 2 weeks)
- RTI: report pay to HMRC on or before each payday (FPS)
- PAYE tax: deducted above the personal allowance (£12,570)
- NIC thresholds: employee and employer NI start above set limits
- Pay HMRC: monthly by the 22nd (or quarterly if small)
- Payroll software: required for RTI submissions
When do you need to run PAYE?
You must register as an employer and operate PAYE if any employee (including a director) earns at or above the Lower Earnings Limit, gets benefits or expenses, or already has another job or pension. In practice, most director-owners paying themselves a salary will need PAYE. If you pay a very small salary below the reporting threshold and nobody has another job, you may not need to register — but many still do to preserve NI records and simplify reporting.
See how salary interacts with dividends in our salary vs dividends guide.
Registering as an employer
Register for PAYE online with HMRC — ideally before your first payday, as it can take up to two weeks to receive your employer PAYE reference and accounts office reference. You cannot file payroll without these. You can register up to two months before you start paying staff.
Running payroll and RTI
Each pay period you calculate gross pay, deductions (income tax, employee NIC, pension, student loan) and net pay, then send HMRC a Full Payment Submission (FPS) on or before payday under Real Time Information (RTI). If you reclaim any amounts (for example, employment allowance) you may also send an Employer Payment Summary (EPS). You must give each employee a payslip and, after year end, a P60.
This all runs through payroll software — HMRC's own Basic PAYE Tools works for very small employers, or use a commercial package.
Tax, NIC and thresholds
Income tax is deducted on earnings above the personal allowance (£12,570) using the employee's tax code. Employee and employer National Insurance become due above their respective thresholds; employer NIC is a real cost to the company, though the Employment Allowance can offset some employer NIC for eligible businesses. Auto-enrolment pension duties may also apply once you have qualifying staff. See our employer NIC changes guide.
Paying HMRC and deadlines
You pay HMRC the tax and NIC you deducted (plus employer NIC) monthly, by the 22nd of the following month if paying electronically. Small employers owing under £1,500 a month can arrange to pay quarterly. Late payment and late RTI filing both attract penalties, so set a reminder each month even if the amounts are small.
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View company packagesFAQ
Do I need to register for PAYE if I only pay myself a director's salary?
Usually yes, if your salary reaches the Lower Earnings Limit, you receive benefits, or you have another job or pension. Many directors register even for a small salary to preserve their National Insurance record and keep reporting straightforward.
How do I register as an employer?
Register for PAYE online with HMRC, ideally before your first payday. It can take up to two weeks to receive your employer PAYE reference and accounts office reference, which you need before you can file any payroll. You can register up to two months in advance.
What is RTI payroll reporting?
Real Time Information (RTI) requires you to report pay and deductions to HMRC on or before each payday, usually via a Full Payment Submission (FPS) from your payroll software. It replaced the old year-end-only reporting, so HMRC sees payroll figures as they happen.
When do I pay HMRC the PAYE I've deducted?
You pay the income tax and National Insurance you deducted, plus employer NIC, monthly by the 22nd of the following month when paying electronically. Small employers owing under £1,500 a month can arrange to pay quarterly instead.
What payroll software do I need?
You need software that can make RTI submissions to HMRC. Very small employers can use HMRC's free Basic PAYE Tools; most others use a commercial payroll package, which also produces payslips, P60s and handles pensions and student loans.