Payroll (UK)

In the UK, payroll is the list of employees in your company and their salary details. You have to consider payroll when you’re a limited company with employees, but not as a sole trader. This is done by Pay As You Earn (PAYE).

When you’re on someone’s payroll, this means that you are paid regularly by an employer. It often means that you are an employee, but it can also be applied to freelancers and independent contractors.

How does UK payroll work?

Your salary is calculated by taking away certain payments such as:

• Income Tax 
• National Insurance
• Student loan repayments
• Pension contributions
• Save As You Earn contributions

You’ll see all of these deductions listed on your payslip, showing both your gross and net income. 

Why use payroll?

For any business, setting up payroll is a requirement. You’ll use it to:

• Calculate your employees’ pay and tax contributions
• Pay your employees
• Reporting payment details to HMRC
• Informing the Student Loans Company of any employees repaying their loans

How do I submit UK payroll?

There are various different ways of doing UK payroll:

• By hand
• Using payroll software
• With an accountant

Be aware that you’ll have to send your pay deductions monthly to HMRC:

• 19th of every month if you pay by post
• 22nd of every month if you pay online

With any of these choices, you should make sure that you understand what’s involved. You’ll need all of the below information to be able to do the task yourself or to outsource it to an accountant:

• Employee name, address, National Insurance number, salary
• Employee working hours including sick days
• The employee’s P45
• Employee ID – passport or birth certificate i.e. proof of citizenship
• Records of salary or hourly wage
• Commission or tips record
• Any employee benefits

To read more about how payroll works, take a look at the guidelines from HMRC.