Pay As You Earn (PAYE) – Registering as an Employer

Table of Contents

Introduction

As a UK employer, understanding your responsibilities towards payroll and tax is essential. The Pay As You Earn (PAYE) system allows employers to deduct Income Tax and National Insurance contributions (and other repayments, e.g., student loans) from their employees’ wages and pay them to HMRC. Carry on reading for our step-by-step guide on how to register as an employer for PAYE – if you’re looking for a payroll solutions partner and/or are unsure whether or not you need to register for PAYE, please contact us today.

Step 1: Determine Your Employer Status

Before you start registering for PAYE, you must establish your employer status. Generally, you’ll need to register if you meet any of the following conditions:

You’re a director of a limited company and paying yourself a salary
You have at least one employee
You’re paying an employee £120 or more per week
You’re providing employee benefits like a company car or expenses
You work in the construction industry and hire (or plan to hire) sub-contractors

If your employee(s) earns less than £120 per week, you don’t need to register for PAYE – and it may not be mandatory if your employees don’t have other employment, receive benefits or expenses, or are already receiving a pension. However, regardless of your registration status, you are still responsible for maintaining accurate payroll records.

Self-Employed and Sole Traders

If you are a self-employed worker or sole trader paying yourself only (see above if you have an employee), you are not classed as an employer and are not required to set up PAYE before paying yourself. In the case where you also work for another employer, it is their responsibility to register for PAYE, not yours.

However, being self-employed does not exempt you from taxes altogether. Instead of having Income Tax and National Insurance contributions deducted from your income through PAYE, you will need to register for a Self-Assessment Tax Return. At the end of each tax year, HMRC will calculate your tax owed based on the information provided, which you will pay within the following financial year.

Step 2: Gather Required Information

To begin the PAYE registration process, you’ll need to gather specific information about your business. Ensure you have the following details readily available:

Business name, trading name, and registered address
Contact details, including telephone number and email address
At least one company director’s details, including their National Insurance number
Nature of your business activities
Business start date and anticipated first payday
The number of employees you plan to hire initially

Step 3: Obtain an Employer PAYE Reference

To register successfully for PAYE, you’ll need to obtain an Employer PAYE Reference (also known as an Employer Reference Number or ERN). This unique reference is assigned to your business by HMRC and is used to identify you as an employer. You can obtain an ERN by contacting HMRC’s Employer Helpline or by completing the online registration process.

When to Register for PAYE

You must register for PAYE prior to the first day of paying yourself, or your staff. According to current HMRC guidelines, it can take up to five working days (but often takes longer in peak times) to obtain your PAYE reference number. Though it’s sometimes possible to register and get your number a week ahead of your intended payday, we recommend registering at least a month ahead to allow for sufficient processing time and HMRC delays – however, you can’t register more than two months ahead of the intended pay date.

In situations where it isn’t feasible to wait for the reference number, and you need to start paying employees quickly, generate the submission documents through your chosen payroll system, and submit a late payment to HMRC once your PAYE reference has come through, stating the reason for a late submission.

If you need help with PAYE registration, we can act as your agent and complete the process for you – please get in touch to find out more.

Step 4: Set up Your Payroll System

After receiving your Employer PAYE Reference, you’ll need to set up a reliable payroll system. This system will help you accurately calculate and report your employees’ Income Tax and National Insurance contributions.

If you engage our payroll services, we’ll ensure you’re fully compliant with HMRC regulations – we use BrightPay payroll software, an award-winning solution that’s HMRC-recognised, supports all RTI submission types, and includes full Auto-Enrolment functionality. You’ll also have access to your own secure self-service portal, where you can view/download various items such as employee and employer payslips, tax payments due, P60s, and much more.

Step 5: Understand Your Employer Responsibilities

As an employer registered for PAYE, you have several ongoing responsibilities, including:

Calculating and deducting income tax and National Insurance contributions from your employees’ salaries
Reporting payroll information to HMRC on or before each payday
Maintaining accurate records of your employees’ earnings, deductions, and payments
Issuing payslips to your employees
Submitting an annual employer’s return and providing employees with P60 forms.

Our dedicated payroll team have years of experience across a range of clients in different industries – if you choose to work with us, we can help you manage all of your employer responsibilities, and ensure you remain compliant with bodies such as HMRC and The Pensions Regulator.

Need Help Registering for PAYE?

Registering for PAYE in the UK is an important step towards complying with tax obligations as an employer. If you’re unsure about registration requirements or have questions about your responsibilities, our dedicated payroll specialists are here to help. At Mercian Accountants, we aim to simplify the process and provide the expertise you need – just message us through our online form, call 01743 562430, or email hello@mercianaccountants.co.uk.