If your UK company pays a salary — even just to you as director — you'll usually need to operate PAYE. That means registering as an employer, submitting Real Time Information (RTI) to HMRC on or before each payday, deducting the right income tax and National Insurance, and meeting pension auto-enrolment duties. Here's how it works.
What is PAYE?
PAYE (Pay As You Earn) is the system employers use to deduct income tax and National Insurance contributions (NICs) from employees' pay and send them to HMRC. It applies to directors' salaries as well as employees'.
Registering as an employer
You must register as an employer with HMRC before the first payday. Once registered, you receive the references needed to report payroll and make payments.
Real Time Information (RTI)
Under RTI, you report pay and deductions to HMRC each time you pay someone, on or before the payday. The two key submissions are the Full Payment Submission (FPS) and, where relevant, the Employer Payment Summary (EPS).
| Deduction | Paid by |
|---|---|
| Income Tax (PAYE) | Employee (deducted from gross pay) |
| Employee National Insurance | Employee (deducted from gross pay) |
| Employer National Insurance | Employer (additional cost) |
| Pension contributions | Employee and employer under auto-enrolment |
Pension auto-enrolment
Employers must automatically enrol eligible staff into a workplace pension and contribute to it. There are ongoing duties to assess staff, make contributions and re-enrol periodically.
Running payroll smoothly
- Register as an employer with HMRC before the first payday.
- Operate the correct tax codes for each employee.
- Submit an FPS on or before every payday.
- Pay HMRC the tax and NICs due by the monthly deadline.
- Meet auto-enrolment pension duties.
- Provide payslips and issue P60s and P45s when required.
Common mistakes to avoid
The pitfalls we see businesses run into most often on this topic.
- Paying a salary before registering as an employer with HMRC.
- Submitting RTI late — it must be on or before payday.
- Using the wrong tax code and under- or over-deducting tax.
- Overlooking employer National Insurance as a real cost of hiring.
- Ignoring pension auto-enrolment duties.
Frequently asked questions
How Stratancy can help
Stratancy runs your UK payroll end to end — employer registration, RTI submissions on time every payday, accurate tax and NIC deductions, payslips, and pension auto-enrolment. For director-shareholders, we advise on a tax-efficient salary and dividend mix. Payroll is included in our fixed monthly packages, so you stay compliant with HMRC without lifting a finger.