# PAYE for Employers: A Plain-English Guide

> A practical UK guide to PAYE for employers: what it is, what you must deduct and report to HMRC, key deadlines, payslips and forms, and how to stay compliant when you take on staff.

*Section: Business — By Marcus Vale (Business & Markets Editor) — Published September 16, 2023 — 6 min read*

Canonical URL: https://dailyjunction.org/business/paye-for-employers
Tags: paye, employers, payroll, hmrc, small business

## Key takeaways

- PAYE is the system employers use to deduct Income Tax and National Insurance from employees' pay and send it to HMRC.
- You usually must register as an employer and operate PAYE if any employee earns at or above the lower earnings threshold or has another job or pension.
- Each payday you report pay and deductions to HMRC in real time using a Full Payment Submission, then pay what is due monthly or quarterly.
- PAYE also collects student loan repayments, pension contributions and other adjustments, and you must give employees payslips and a P60 each year.
- This is general information, not tax or legal advice — check GOV.UK and HMRC, and consider payroll software or an accountant.

Taking on your first member of staff is a milestone — and the moment you become responsible for collecting tax on the government's behalf. PAYE is the machinery that makes that happen: every payday, you work out what to deduct, report it to HMRC, and pass the money on. Done well it is routine; done badly it leads to penalties and unhappy staff. This guide explains what PAYE is, what you must deduct and report, the deadlines that matter, the forms involved, and how to keep on the right side of HMRC. *This is general information, not tax or legal advice.*

## What it is

**PAYE — Pay As You Earn — is the system employers use to deduct Income Tax and National Insurance contributions from employees' wages and pay them to HMRC.** Rather than employees settling their whole tax bill at the end of the year, tax is taken from each payslip as they earn, hence the name.

As an employer, you do not just pay wages — you operate PAYE on HMRC's behalf. That means calculating the right deductions for each person, recording them, reporting them to HMRC, and paying over the tax and National Insurance you have withheld (plus the employer's own National Insurance). For the employee's side of how this works, our explainer on [what PAYE is](/business-finance/what-is-paye) is a useful companion to this employer-focused guide.

## When you must operate PAYE

Not every payment triggers PAYE, but most employment does. You generally need to register as an employer and operate PAYE if any of your employees:

- Earns at or above the **lower earnings limit** (a threshold set each tax year);
- Already has another job;
- Receives a pension; or
- Receives expenses or benefits.

In practice, if you are paying someone a normal wage, you will almost certainly need to operate PAYE. Even where an employee earns too little to pay any tax, you may still need to register and report their pay. You should usually **register before your first payday**, and registration can take a little time, so do not leave it to the last minute. If you are at the very start of this, our guide on [how to hire your first employee](/business/how-to-hire-first-employees) sets the wider scene.

> PAYE is not optional once you employ someone above the threshold. It is a legal duty, and registering late or failing to report can lead to penalties.

## What you deduct and report

PAYE is more than just Income Tax. Each payday, you typically calculate and handle:

- **Income Tax** — based on the employee's tax code and earnings.
- **National Insurance contributions** — both the employee's and the employer's share. See our explainer on [National Insurance](/business-finance/what-is-national-insurance) for how the classes and thresholds work.
- **Student loan and postgraduate loan repayments** — where the employee is liable.
- **Pension contributions** — including those under [auto-enrolment](/business/what-is-pension-auto-enrolment), where applicable.
- **Other adjustments** — such as statutory payments for sick leave or family leave, and any attachment of earnings orders.

The employee's **tax code** is central: it tells you how much tax-free pay they are entitled to and therefore how much to deduct. Codes come from HMRC and can change during the year, so you must apply updates promptly.

## Reporting in real time

The UK runs PAYE on a **Real Time Information (RTI)** basis. This means you report pay and deductions to HMRC *every time you pay an employee*, on or before payday — not once a year. The two key submissions are:

| Submission | Purpose |
|------------|---------|
| Full Payment Submission (FPS) | Reports each employee's pay, tax and deductions, sent on or before payday |
| Employer Payment Summary (EPS) | Reports adjustments, such as reclaiming statutory payments or telling HMRC no one was paid that period |

You make these submissions through **payroll software**. Most employers use commercial payroll software or an accountant; HMRC also provides basic free tools for very small employers, though these have limits. Whatever you use, the principle is the same: report on time, every time.

## Paying HMRC: the deadlines

After reporting, you pay HMRC what you owe — the tax and National Insurance you deducted, plus employer's National Insurance, less anything you can reclaim. The usual deadlines are:

- **Monthly:** by the 22nd of the following tax month if you pay electronically (the 19th if paying by post).
- **Quarterly:** if your average monthly PAYE liability is below a set amount, you may pay quarterly instead.

Missing these deadlines can trigger interest and penalties, so build the payment into your routine. Setting money aside as you run each payroll helps avoid a nasty surprise when the bill is due.

## Payslips, P60s, P45s and benefits

PAYE comes with obligations to your employees as well as to HMRC. You must:

- **Give a payslip** to each employee on or before payday, showing gross pay, deductions and net pay.
- **Provide a P60** after the end of the tax year, summarising the employee's total pay and tax for the year.
- **Issue a P45** when an employee leaves, so they can give it to their next employer. Our explainer on [what a P45 is](/business-finance/what-is-a-p45) covers what it contains.
- **Report expenses and benefits** you provide, where required. Certain taxable benefits in kind are reported, often via a [P11D](/business-finance/what-is-a-p11d), and may affect the employee's tax code.

You must also keep payroll records for the period HMRC requires (currently several years), covering what you paid, what you deducted and reported, and any leave and benefits.

## Staying compliant

PAYE is manageable, but it rewards good habits:

1. **Register in good time** before your first payday.
2. **Use reliable payroll software** or a competent accountant to handle calculations and RTI submissions.
3. **Apply tax codes and updates** from HMRC promptly.
4. **Report on or before payday**, every payday.
5. **Pay HMRC by the deadline**, and set the money aside as you go.
6. **Keep clear records** and give employees their payslips and year-end documents.

Payroll also overlaps with wider employment matters. Different contract types — for example a [zero-hours contract](/business/what-is-a-zero-hours-contract) — still go through PAYE when the person is your employee, and even when employment ends, perhaps via a [settlement agreement](/business/what-is-a-settlement-agreement), some payments may be taxable through payroll. Getting the basics right keeps all of this straightforward.

## The bottom line

PAYE is the system that turns you, the employer, into a collector of Income Tax and National Insurance for HMRC. You register before your first payday, deduct the right amounts each time you pay staff, report them in real time through payroll software, pay HMRC by the monthly or quarterly deadline, and give employees their payslips and year-end forms. It is a legal duty with real penalties for getting it wrong, but with good software or a reliable accountant and a steady routine, it becomes a predictable part of running a business. *This is general information, not tax or legal advice; check GOV.UK and HMRC, and take professional guidance for your circumstances.*

## Frequently asked questions

### What is PAYE for employers?

PAYE (Pay As You Earn) is the system through which employers deduct Income Tax and National Insurance contributions from employees' wages and pay them to HMRC. As an employer you operate PAYE as part of running payroll, calculating deductions, reporting them to HMRC on or before each payday, and paying the amounts due. This is general information, not tax advice.

### When do I need to register as an employer?

You generally need to register for PAYE before your first payday, and usually must operate PAYE if any employee earns at or above the lower earnings limit, already has another job, or receives a pension. Even if no one yet earns enough to pay tax, you may still need to register and report. Check the current thresholds on GOV.UK as they can change each tax year.

### How often do I report and pay PAYE?

You report pay and deductions to HMRC every time you pay an employee, on or before payday, using a Full Payment Submission through payroll software. You then pay what you owe to HMRC monthly by the 22nd (if paying electronically), or quarterly if your average monthly liability is below a set amount. Deadlines and thresholds are set by HMRC.

### What records and forms must I give employees?

You must give each employee a payslip on or before payday showing their pay and deductions. After the tax year ends you provide a P60 summarising the year's pay and tax. When someone leaves, you issue a P45. If you provide certain expenses or benefits, you may also need to report them, sometimes via a P11D. Keep payroll records for the period HMRC requires.

## Sources

- [GOV.UK — PAYE and payroll for employers](https://www.gov.uk/paye-for-employers)
- [GOV.UK — Register as an employer](https://www.gov.uk/register-employer)
- [HMRC](https://www.gov.uk/government/organisations/hm-revenue-customs)

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