Guide
A Complete Guide to Payroll in the UK
Global payroll
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Managing payroll in the United Kingdom (UK) requires a deep understanding of employment laws, HM Revenue and Customs (HMRC) regulations, and tax obligations. From HMRC registration and Full Payment Submissions (FPS) to National Living Wage (NLW) compliance, this guide provides the essential information to help you run payroll efficiently, accurately, and in full compliance with UK regulations.
What You'll Learn
This guide equips you with a foundational understanding of payroll tax requirements, payroll software, and best practices for managing pay and deductions, including:
- Essential UK payroll regulations and their impact on your business, including employer obligations under PAYE (Pay As You Earn) and Real Time Information (RTI).
- Step-by-step guide to setting up and running payroll, including HMRC registration, employee onboarding, payment processing, and submitting Full Payment Submissions (FPS) and Employer Payment Summary (EPS).
- Income tax and National Insurance contributions (NICs): Learn how tax codes work, what deductions apply, and how pension contributions fit into your payroll system.
- National Minimum Wage (NMW) and National Living Wage (NLW) compliance, including requirements for employees who work more than 48 hours per week.
- Payroll software and outsourcing options: Compare in-house payroll systems versus outsourcing payroll to a provider.
- Record keeping and tax documentation: Learn how to maintain compliant payroll records and submit required reports to HMRC.
- Payslips and payroll reports: Understand what details must be included in payslips and how payroll reports assist in tax year compliance.
- Auto-enrolment and workplace pension schemes: Learn about employer obligations regarding pension contributions and the UK government's auto-enrolment requirements.
- Global payroll and payroll services: Explore how international payroll solutions help businesses streamline operations across different jurisdictions.
Understanding the Payroll Process
The payroll process involves several critical steps, from registering with HMRC to processing payroll and ensuring compliance with tax laws. Whether you manage payroll in-house or use a payroll provider, understanding these steps will help streamline operations:
- Register as an employer with HMRC
- Collect employee details, including tax codes and entitlement information
- Calculate employee earnings, deductions, and pension contributions
- Process payroll and generate payslips
- Submit RTI reports, including FPS and EPS, to HMRC
- Ensure compliance with payroll tax laws and state pension contributions
Who is this guide for?
- Business owners of all sizes, from small businesses to established companies, looking to comply with UK payroll regulations.
- HR and finance professionals responsible for payroll tax, pension schemes, and employee wages.
- Anyone seeking a solid understanding of UK payroll, including how to pay your employees correctly and on time.
FAQs
What is PAYE and how does it work?
PAYE (Pay As You Earn) is the system used by HMRC to collect Income Tax and National Insurance contributions directly from employees' wages. Employers must deduct these payments and submit them to HMRC using RTI-compliant payroll software.
How do I register as an employer with HMRC?
Before paying your employees, you must register as an employer with HMRC. The process can be completed online, and you will receive an employer PAYE reference number and an Accounts Office reference to use when submitting payroll tax payments.
What is RTI and how do I submit it?
Real Time Information (RTI) is the HMRC system requiring employers to report payroll information each time they pay their employees. This is done through Full Payment Submission (FPS) and, when necessary, an Employer Payment Summary (EPS).
What are the different types of statutory payments in the UK and how are they processed?
Statutory payments include:
- Statutory Sick Pay (SSP)
- Statutory Maternity Pay (SMP)
- Statutory Paternity Pay (SPP)
- Statutory Adoption Pay (SAP) Each type has specific eligibility requirements and must be processed correctly within your payroll system
How can Deel help me run UK payroll?
With Deel, your business can easily hire independent contractors and employees in the United Kingdom. No more worrying about local laws, complex tax systems, or managing international payroll. The average onboarding time frame in the United Kingdom is 7 days with Deel.
Plus, Deel Global Payroll enables you to manage your UK and international workforce all within one platform.
How do payroll tax codes work in the UK?
A tax code is issued by HMRC to determine how much Income Tax should be deducted from an employee’s pay. Employers must ensure they apply the correct tax rates in their payroll system to avoid under or over-deductions.
What are the benefits of using a payroll provider for UK employees?
A payroll provider can help businesses process payroll more efficiently, ensure compliance with tax laws, and reduce the time-consuming administrative burden of payroll management. Payroll solutions also automate key functions such as tax deductions, pension contributions, and payslip generation.
