Registering for PAYE: How to Set Up HMRC PAYE as an Employer

If you are starting a limited company, hiring your first employee or paying yourself a director's salary, one of the earliest obligations you will face is registering for PAYE with hm revenue and customs. Get it right, and payroll runs smoothly from day one. Get it wrong, and you could face automatic penalties before you have even issued a first payslip.

This guide walks you through the entire paye registration process, from understanding when you need to register as an employer, to completing the paye registration form, activating your paye online service and staying compliant once your paye scheme is live.

Key Takeaways

You must register for HMRC PAYE if you pay any employee or company director a salary at or above the national insurance secondary threshold, or if they receive taxable benefits such as non cash incentive awards. For the tax year 6 April 2026 to 5 April 2027, the secondary threshold sits at £5,000 per year (roughly £96 per week). Even a modest director's salary from a limited company can trigger the requirement.

You should register for PAYE before your first payday and no more than two months in advance. HMRC can take up to 15 working days to issue your employer paye reference number and accounts office reference, so plan ahead. Registration is done through a government gateway account and hmrc online services, which create your paye online for employers service to file Real Time Information (RTI), including each full payment submission.

Even if employees earn below the threshold, you must still keep payroll records and issue payslips. PAYE covers income tax, national insurance contributions and often employee pension contributions. Late or incorrect registration can lead to penalties for late FPS filings, late paye payments to HMRC and problems with employees' tax and benefit records, including disruption to Universal Credit or support allowance claims.

What is PAYE and when do you need to register?

PAYE stands for Pay As You Earn. It is HMRC's paye system for collecting income tax and national insurance from wages, salaries and some occupational pension payments. The paye system has been in use since the 1940s and remains the primary mechanism through which employers deduct tax before employees receive their pay.

Through PAYE, employers operate payroll on salaries, wages, bonuses and taxable benefits for employees and company directors. This includes a director's salary paid from a limited company. Company directors are treated as employees for PAYE, so paying yourself even a modest salary usually triggers a need to register for HMRC PAYE.

For the current tax year (6 April 2026 to 5 April 2027), you must register once anyone is paid at or above the secondary national insurance threshold, or once income tax is due on their earnings. PAYE collects income tax and national insurance from wages on every payday.

Common situations that require registration include:

• Hiring at least one employee for the first time

• Paying a company director through payroll

• Starting to provide taxable benefits or expenses to staff

• Taking on regular casual staff whose employee's earnings cross the threshold

• Your company employs workers who have another job or receive an occupational pension

Circumstances when you must – and do not – need to register for PAYE

Understanding exactly when you need to register saves you from unnecessary admin or, worse, missed deadlines. Here is a clear breakdown.

When you must register:

• You pay any worker at or above the secondary threshold (£96/week, £417/month, £5,000/year for 2026/27)

• You register if employees earn above £123 weekly, which sits well above the secondary threshold

• You pay a company director through payroll, even if the director's salary is small

• You deduct tax and national insurance or process employee pension contributions for a workplace pension

• You provide taxable benefits, including non cash incentive awards

• The employee has another job, receives a pension, or has student loan repayments to collect

When you usually do not need to register:

• All workers earn below the secondary threshold, have no other income, and receive no taxable benefits

• You only pay dividends to company directors with no director's salary or employee's wages

• You are a sole trader paying yourself drawings (taxed via self assessment, not PAYE)

From April 2025, the registration trigger moved from the Lower Earnings Limit to the secondary threshold. However, you may still need to submit RTI returns for employees earning between the LEL and secondary threshold to protect their state pension age entitlement and uk national insurance number records.

If even one worker crosses the threshold, you must register and then report all employees via PAYE, regardless of individual earnings levels.

When to register for PAYE and how long HMRC takes

You should register before your first payday, and you cannot register more than two months before you start paying employees. This window means timing matters.

HMRC typically processes a paye registration within 15 working days, issuing your employer paye reference and accounts office reference by post. In some cases it can take up to 20 working days to receive your employer paye reference number, especially during busy periods.

Practical timeline example: If your first payday is 30 September 2026, aim to start the registration process around mid-August 2026. This gives you a comfortable buffer for postal delays while staying inside the two-month window.

You can see your PAYE details in your hmrc online account once they are generated, sometimes before the paper letter arrives. But delays in receiving your reference do not remove the obligation to pay staff on time and to submit a full payment submission as soon as possible once your scheme is active.

Preparing before you register

Before you start the online paye registration, gather the following:

• Company name, trading name (if different) and registered office address

• Business address (PO boxes are not accepted)

• Companies House number for a limited company

• Unique Taxpayer Reference (UTR) - your 10-digit number from HMRC

• Expected first payday and pay frequency (weekly, monthly, four-weekly)

• Number of employees and directors who will be paid

• Contact details for the person responsible for payroll

• At least one director or owner must have a national insurance number

You will also need your business name and address when registering for PAYE. Decide how you will run payroll: in-house using RTI-compliant payroll software, or through an accountant or payroll bureau. Most employers must file online. You can use HMRC's free Basic PAYE Tools for fewer than 10 employees, which is a solid starting point for small businesses.

Certain employers, such as domestic employers or care and support employers, may need to register by phone rather than using the standard online form.

You should also consider pension auto-enrolment duties. By law, you must automatically enroll eligible staff into a workplace pension scheme, and both employee pension contributions and employer contributions should be handled through payroll from the very first pay run.

Step-by-step: registering for PAYE online

Most employers can register online via the GOV.UK Register as an Employer service. Here is what the journey looks like for a small limited company.

Step 1 - Go to the official "Register as an employer" page on GOV.UK and click "Start now." Answer the eligibility questions about your business structure: limited company, sole trader, partnership, or other.

Step 2 - Sign in with an organisation government gateway account. If you do not have government gateway sign in details, create a new government gateway user id and set up an hmrc online account for the business. You will need your government gateway user credentials for ongoing access.

Step 3 - Inside your business tax account, add the "PAYE for Employers" service. Specify that you are a limited company and enter your 10-digit UTR. Use your government gateway id to register online through this portal.

Step 4 - Complete the paye registration form. Fields include: first payday, frequency of pay (monthly, weekly, annual), number of employees, whether you operate under the construction industry scheme, details of any subcontractors, and contact details for the employer online portal. You will also confirm your company pay arrangements.

Step 5 - Submit the form. HMRC will issue your employer paye reference number and accounts office reference by post, along with an activation code for paye online, usually within about 10 to 15 days.

Once the paye online service is activated, you can send RTI submissions - including each payment submission and Employer Payment Summary - and view PAYE liabilities inside your online account.

Using PAYE Online and your HMRC online account

After registration, your hmrc paye online account becomes the hub for ongoing payroll management. Key paye tasks you can perform include:

• Viewing tax code notices, student loan notices and national insurance verification notices

• Checking paye liabilities and seeing how much tax you owe hmrc

• Sending FPS and EPS reports

• Reviewing payment history and confirming what HMRC has received

• Checking for any paye bill that is outstanding

An activation code must be entered within 28 days of receipt to fully enable paye online. If you miss this window, you will need to re-enrol through hmrc online services.

Your payroll software normally connects to hmrc online services directly to send submissions, but you can also sign into your hmrc online account to verify what has been received. Bookmark the paye online sign-in page alongside other services like Corporation Tax and VAT in your government gateway account for easy access to all public services in one place.

What if your PAYE registration or reference arrives late?

There is no stand-alone penalty purely for registering late. However, late reporting and late payment can attract fines and interest. If you owe hmrc pay that is overdue, interest accrues from the missed deadline.

If your employer paye reference has not arrived by first payday, you should still pay staff on time. Run payroll calculations using the correct tax codes and national insurance tables, and keep detailed records. Employees must be paid in compliance with National Minimum Wage legislation regardless of any registration delay.

New employers have 120 days to submit their first report after registering. The first full payment submission can usually be sent within this grace period once the paye scheme is active, and you should include the relevant late submission reason code on the FPS.

Late payroll reports can affect employees' benefits, including Universal Credit and Employment and support allowance. Repeated late FPS filings attract penalties that scale by workforce size - roughly £100 per month for 1 to 9 employees, up to £400 for 250 or more.

Contact HMRC promptly through the employer helpline if registration problems are likely to cause significant delay, and document any "reasonable excuse."

PAYE, National Insurance and workplace pensions

Through PAYE, employers collect income tax and employee national insurance from each employee's pay, and separately calculate employer national insurance above the secondary threshold. For the 2026/27 tax year, the employer NIC rate is 15% on employee's earnings above the £5,000 annual threshold.

Employer national insurance is an additional cost on top of salaries. Many limited company directors plan their director's salary to sit at or near the national insurance threshold to pay uk national insurance efficiently while minimising employer NIC. This is a common and legitimate tax planning strategy.

Eligible staff must usually be automatically enrolled into a workplace pension. Both employee pension contributions and employer pension contributions are processed via payroll and reported in each payment submission to HMRC.

All of these deductions and contributions - income tax, national insurance contributions, pension contributions, student loan repayments, and any statutory pay recoveries - must be reflected accurately in each full payment submission. You must use compliant payroll software to calculate tax and process deductions correctly, whether you operate paye in-house or through a bureau.

Employers must also have at least £5 million of Employers' Liability insurance cover once they employ staff.

Ongoing PAYE duties after registering

Once your paye scheme is live, your paye responsibilities include a regular set of tasks:

Employers must report earnings to HMRC after each payday. You must report to HMRC using a full payment submission on or before each payday, showing gross pay, deductions, national insurance and any pension contributions for each employee's salary.

An Employer Payment Summary is used for adjustments such as reclaiming statutory pay (including sick pay and statutory pay recoveries) or reporting no payments in a tax month.

You must pay HMRC monthly unless you qualify to pay quarterly. Smaller employers with a total paye bill under £1,500 per month may be able to agree quarterly payment arrangements.

Employers must keep payroll records for at least three years. This includes RTI files, payslips, calculations, and details of each employee's wages and deductions. You must also report employee pay and deductions to HMRC by their first payday. Even if you are not yet registered, employers must keep payroll records.

Cancelling or pausing your PAYE registration

When a business stops employing staff or paying directors above the threshold, it should close or pause its paye scheme with HMRC. To cancel, mark the final FPS as the last submission and inform HMRC there will be no further company pay under that employer paye reference.

If the business is only temporarily stopping for less than a tax year, it may be better to keep the paye scheme open and file EPS reports for months with no payments. This prevents automatic penalty notices for missing RTI reports.

If in future the business hires staff again or resumes paying a director's salary, it may need to reactivate or set up a new paye scheme, depending on HMRC instructions. An offshore employer with UK-based staff would follow similar rules for closing or pausing their scheme.

Keeping HMRC informed prevents unnecessary penalty notices and protects your record as a compliant employer.

FAQs about registering for PAYE

Do sole traders need to register for PAYE?

A sole trader does not need to register for PAYE simply to pay themselves drawings, as their income is taxed via self assessment. However, if a sole trader employs staff or pays anyone a wage as an employee, they must register as an employer and operate paye on that employee's pay, regardless of business structure.

Can a payroll agent or accountant register PAYE for me?

Accountants and payroll bureaus can usually complete paye registration on behalf of employers using their own agent credentials. However, the employer still needs their own government gateway account for ongoing access to their hmrc online account and to manage their business tax account directly.

Can I run an annual payroll instead of monthly?

Annual payroll is only permitted where every employee and director is paid just once a year in a single lump sum. Otherwise, HMRC expects monthly or weekly RTI reporting. If your company employs anyone on regular monthly or weekly pay, you must run payroll and file FPS at each pay period.

Do I need PAYE if I only pay dividends as a director?

Paying only dividends to company directors, with no director's salary or other employees, normally does not require paye registration. Tax on dividends is handled via self assessment and director tax codes. However, the moment you introduce any employee's salary or taxable benefit, you will need to register.

How long should I keep PAYE records?

Employers should keep PAYE records - including RTI files, payslips, tax and national insurance calculations - for at least three full tax years after the end of the relevant tax year. HMRC can charge penalties for poor record-keeping, and these records are essential if HMRC checks your paye calculations or if you face a compliance review of your construction industry obligations.