Running payroll

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Overview

As an employer operating PAYE as part of your payroll, you need to complete certain tasks during each tax month. Tax months run from the 6th of one month to the 5th of the next.

You must send an Employer Payment Summary (EPS) to HM Revenue and Customs (HMRC) if you’ve not paid any employees in a tax month.

On or before your employees’ payday

Every time you pay your employees, use your payroll software to:

  1. Record their pay - include their salary or wages and any other pay.

  2. Calculate deductions from their pay, like tax and National Insurance.

  3. Calculate the employer’s National Insurance contribution that you’ll need to pay on their earnings above £242 a week.

  4. Produce payslips for each employee (you can use different software if yours does not have this feature).

  5. Report their pay and deductions to HMRC in a Full Payment Submission (FPS).

If you’re already operating an employer PAYE scheme and an employee does not meet the conditions for PAYE, you’ll still need to record and report their pay.

In the next tax month (starting on the 6th)

You can view what you owe from your FPS online from the 10th.

  1. Send an Employer Payment Summary (EPS) by the 19th to claim any reduction on what you’ll owe HMRC (for example statutory pay).

  2. View the balance of what you owe in your HMRC online account, within 2 days (or by the 14th if you sent the EPS before the 11th).

  3. Pay HMRC by the 22nd (or the 19th if paying by post) - you may have to pay a penalty if you do not.

If you usually pay less than £1,500 per month, you may be able to pay quarterly instead of monthly. Contact the payment helpline to find out.

Late reporting

HMRC will send you a late filing notice if you’ve paid any employees and do not send an FPS or send one late. They can also charge you a penalty, unless you have a valid reason for reporting late.

Late, missing or incorrect payroll reports can also affect your employees’ income-related benefits, such as Universal Credit.

HMRC will close your PAYE scheme if you’re a new employer and you do not send a report to or pay HMRC in 120 days.

View a printable version of the whole guide

Part of Employ someone: step by step

  1. Step 1 Check your business is ready to employ staff

    1. Prepare your business to take on employees

  2. Step 2 Recruit someone

    You need to advertise the role and interview candidates. You can use a recruitment agency to do this or do it yourself.

    1. Find out about recruiting someone yourself on Acas
    2. Find out about using a recruitment agency

    As an employer you must make sure you recruit employees fairly.

    1. Avoid discrimination during recruitment
    2. Make your application process accessible for employees with disabilities or health conditions

  3. and Check they have the right to work in the UK

    1. Find out how to check an applicant's right to work

  4. and Find out if they need a DBS check

    You may need to check someone's criminal record, for example, if they'll be working in healthcare or with children.

    1. Find out if you need a DBS check
    2. How to do a DBS check

  5. Step 3 Check if they need to be put into a workplace pension

    Check if you need to put your employee into a workplace pension scheme:

  6. Step 4 Agree a contract and salary

    When someone accepts a job offer they have a contract with you as their employer.

    1. Check what the National Minimum Wage is for different ages
    2. Check what the National Minimum Wage is for different types of work
    3. Check what to include in a contract
    4. Agree a written statement of employment particulars

  7. Step 5 Tell HMRC about your new employee

    You must tell HMRC about your new employee on or before their first pay day.

    1. Tell HMRC about a new employee
    2. Get their personal details and P45 to work out their tax code
    3. If you don’t have their P45, use HMRC’s ‘starter checklist’
    4. You are currently viewing: Check what to do when you start paying your employee