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Payroll (UK)

  • 2 min read

In the UK, payroll is the list of employees in your company and their salary details. Of course, there is a lot more to it, which we’ll go into later, but this is the basic breakdown. You have to consider payroll when you’re a limited company with employees, but not as a sole trader.

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

How does UK payroll work?

Your salary will be paid to you with certain costs deducted which include: 

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

What’s the point of it?

For any business, setting up payroll is a crucial requirement. You’ll use it to calculate your employees’ pay, their tax contributions, to actually pay them (which is pretty important!) and to report the payment details to HMRC. If they’re repaying their student loan, you’ll also report these details to the Student Loans Company

There are various different ways of doing UK payroll:

  • By hand
  • Using payroll software
  • With an accountant

And 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

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