Guidance

First time users: how to install and set up Basic PAYE Tools

Updated 27 February 2025

Introduction

This guide will take you through the process of installing Basic PAYE Tools on your computer and setting up an employer and employees.

Basic PAYE Tools is free payroll software from HMRC for businesses with fewer than 10 employees. You can use it to work out payroll deductions and report payroll information online in real time.

Basic PAYE Tools will:

• record your employees’ details
• work out and record your employees’ pay, tax, National Insurance contributions and any student or postgraduate loan deductions every payday
• generate the payroll data that you need to send to HMRC in real time, including starter and leaver information
• generate payslips
• produce an ‘Employer Payment Record’ that shows you how much you need to pay HMRC
• help you to work out statutory payments such as Statutory Sick Pay and Shared Parental Pay using the calculators provided
• help you to claim Employment Allowance to reduce your annual National Insurance liability

It is not designed for agents or payroll bureaus acting for multiple employers.

Before you start

Before using this guide you must:

• register as an employer with HMRC
• enrol for PAYE Online for employers
• download Basic PAYE Tools
• download the latest version of Adobe reader on the Adobe website

You’ll need an active internet connection for Basic PAYE Tools to:

• send your payroll information to HMRC every time you pay your employees
• update the software automatically

Install Basic PAYE Tools

This is a guide for Windows and Mac users. Mac users may need to amend security and privacy settings to allow software to be installed.

Linux users can get help to install Basic PAYE Tools on Linux operating systems.

1. Double select the zipped file that you have downloaded on to your computer.
2. Follow the instructions in the pop-up until you reach the licence agreement page.
3. Read the licence agreement.
4. Select ‘I accept the agreement’ to continue with the installation and then select Next. If you do not accept the agreement you will not be able to install Basic PAYE Tools.
5. Select ‘Standard installation’. If you’re an advanced user or system administrator, you can select ‘Custom installation’ to change installation settings.
6. Select Next until you reach the ‘Check for updates automatically’ page.
7. Select the checkbox to make sure that you do not miss any updates to the tool.
8. Select Next, reading the information on each page, until you reach the ‘Installing’ page. The installation can take up to 10 minutes. When it has finished, you will see an ‘Installation complete’ page.
9. Select Finish to complete the installation.

 A shortcut icon to Basic PAYE Tools will appear on your computer desktop.

If you have problems installing Basic PAYE Tools

If Basic PAYE Tools does not install properly, this may be resolved if you:

• restart your computer
• run the installation again

Some antivirus programmes incorrectly put downloaded software into quarantine. Contact your antivirus software provider for support if you cannot retrieve the file from quarantine.

Add an employer

To use Basic PAYE Tools, you first need to add an employer.

Launch Basic PAYE Tools on your computer either by:

• double selecting the Basic PAYE Tools icon on your desktop
• searching for ‘Basic PAYE Tools’ in your start menu

Select Add an employer from the menu on the left to go to the ‘Add employer’ page.

Fields with a red asterisk must be filled in.

Select the green question mark symbols if you need help with a field.

1. On the ‘Add employer’ page, enter the employer’s name.
2. Enter the Employer PAYE reference of 3 numbers followed by a forward slash and up to 10 characters, found on the letter from HMRC after you registered as an employer.
3. Enter the Accounts Office reference ― this 13-character reference is also found on your HMRC letter.
4. Enter your Corporation Tax Unique Taxpayer Reference if applicable.
5. Enter your self-assessment Unique Taxpayer Reference if applicable.
6. Select the relevant tax year for your first real time information submission using Basic PAYE Tools.
7. Select Next.
8. Enter the employer’s address details.
9. Select the checkbox if you are exempt from employer Class 1 National Insurance contributions.
10. Select Next to go to the confirmation page.
11. Read the information on the page and select Next.

This takes you to the ‘Employer details’ page, which includes a warning message (indicated by an orange triangle) about Employment Allowance.

1. Select Employment Allowance in the menu on the left.
2. Read the eligibility criteria on the page and select Next.
3. Answer the questions on the ‘Employment Allowance’ page.
4. Select Next to view your eligibility status for Employment Allowance.

You do not need to add employees if you only need to send an Employer Payment Summary using Basic PAYE Tools.

Add an employee

1. Select Add an employee from the menu on the left of the ‘Manage employees’ page.
2. Select New and current for most employees.
3. Fill in their personal details, including name, address, gender, date of birth, National Insurance number (if known) and passport number (if known).
4. Enter their payroll ID if you have set one up, otherwise you could create a duplicate employment record for this employee. HMRC will use it on any correspondence with you about that employee. If you re-employ someone in the same tax year do not use their previous payroll ID.
5. Select the normal weekly hours worked.
6. If the employee is a company director, enter the date of appointment. Select the ‘Directors’ cumulative method’ of National Insurance calculation if they are likely to reach state pension age during the selected tax year.
7. Enter the employment start date.
8. Select the basis for setting up the employee — a new starter with or without a P45, a new starter receiving an occupational pension, a new starter seconded to work in the UK, or an existing employee. The option selected will bring up related questions.
9. Fill in payment details, including how often you pay your employee, the tax code, National Insurance category letter (for existing employees this will be on your payroll records), whether student or postgraduate loan deductions apply (see the relevant HMRC letter for the plan type).
10. Select Next to finish adding an employee.

Only change an employee tax code if HMRC tells you to.

After installation and set up

You can now start running payroll with Basic PAYE Tools.

Find out how to tell HMRC when an employee leaves, send an Earlier Year Update, find or check an employee’s National Insurance number, and send an Employer Payment Summary using Basic PAYE Tools.