Written by the TaxTune Editorial Team · Reviewed by our qualified accountants · Updated for 2026/27
The quick answer To run payroll you register as an employer with HMRC, choose payroll software, work out each employee's tax and National Insurance using their tax code, then send a Full Payment Submission to HMRC on or before payday. You give the employee a payslip, and you pay the tax and National Insurance you owe to HMRC by the 22nd of the following month.

What you need before you start

  • An employer PAYE reference and Accounts Office reference from HMRC.
  • Recognised payroll software that reports in real time.
  • Each employee's details: date of birth, National Insurance number, start date and tax code, usually taken from a P45 or the new starter checklist.
  • Their agreed pay, and whether they are due statutory pay such as sick pay or maternity pay.
  • Pension auto enrolment details, because most employees must be enrolled.

How to run payroll, step by step

  1. Register as an employer. Do this with HMRC before the first payday. It can take up to 15 working days to get your references, so do not leave it to the last minute.
  2. Set up your software and employees. Add each employee with their tax code and pay. A standard tax code for 2026/27 is 1257L, which gives the £12,570 personal allowance spread across the year.
  3. Work out gross to net for each payday. The software applies income tax through PAYE, then employee National Insurance, then any pension contribution and student loan. What is left is the net pay the employee receives.
  4. Add employer costs. On top of gross pay you pay employer National Insurance at 15% on earnings above the £5,000 secondary threshold, plus the employer pension contribution. Budget for these, as they are a real cost beyond the headline salary.
  5. Claim the Employment Allowance if eligible. Most smaller employers can reduce their employer National Insurance bill by up to £10,500 for the year. Tick this in your software so you are not overpaying.
  6. Send the Full Payment Submission. File the FPS to HMRC on or before the day you pay staff. This is the real time reporting that keeps you compliant. If you paid nothing in a month, send an Employer Payment Summary instead.
  7. Give a payslip. Every employee is legally entitled to an itemised payslip on or before payday, showing gross pay, deductions and net pay.
  8. Pay HMRC. Pay the tax and National Insurance to HMRC by the 22nd of the following tax month if you pay electronically, or the 19th if you pay by post. Miss it and interest and penalties follow.

A worked example

Priya hires one employee on £30,000 a year. The employee pays income tax and National Insurance through PAYE, which the software calculates automatically. On top of the salary, Priya pays employer National Insurance at 15% on the pay above the £5,000 threshold, which is 15% of £25,000, or £3,750. Because she qualifies for the Employment Allowance of up to £10,500, that employer National Insurance is wiped out for the year, so her true extra cost is the salary plus the employer pension contribution.

Common payroll mistakes

  • Filing the FPS late. It must reach HMRC on or before payday, not after.
  • Using the wrong tax code. A stale code from an old P45 can leave an employee badly over or under taxed.
  • Forgetting the Employment Allowance. Many small employers pay employer National Insurance they never needed to.
  • Missing pension auto enrolment duties. These apply from the first eligible employee, not once you reach a certain size.

Payroll is monthly, and unforgiving

Every month, on time, with real time filing and pension duties on top. One missed submission can mean penalties. TaxTune runs payroll for you, files every submission, produces the payslips and tells you exactly what to pay HMRC, so you can get on with running the business.

See our payroll serviceAsk about payroll

Frequently asked questions

When do I have to pay HMRC for payroll?

You pay the income tax and National Insurance to HMRC by the 22nd of the following tax month if you pay electronically, or the 19th if you pay by post. Small employers who qualify may be able to pay quarterly.

Do I need to register as an employer for one person?

Yes. As soon as you pay anyone at or above the National Insurance threshold, or they have another job, you must register as an employer and run PAYE, even for a single employee.

What is the Employment Allowance?

It lets eligible employers reduce their employer National Insurance bill by up to £10,500 in 2026/27. You claim it through your payroll software. Some businesses, such as most single director companies, are not eligible.

What is an FPS?

A Full Payment Submission is the report you send HMRC each time you pay staff, showing their pay and deductions. It must be sent on or before payday under real time reporting.

Can I run payroll myself?

You can, using recognised software. Many small employers do. Once you add statutory pay, auto enrolment, joiners and leavers and student loans, the admin and the risk of a costly slip often make outsourcing worthwhile.

What about workplace pensions?

Auto enrolment duties apply from your first eligible employee. You must assess staff, enrol those who qualify, and make employer contributions, with a declaration of compliance to The Pensions Regulator.

Let us run your payroll

Whether it is one employee or twenty, we will set up your scheme, run each pay run on time, handle real time filing, produce payslips, manage joiners, leavers and statutory pay, and keep your pension duties in order. You approve, we do the rest, on a fixed fee per payslip.

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