| System | PAYE with Real Time Information (RTI): report on or before every payday |
| Employer registration | before the first payday, at most 2 months before |
| Employer National Insurance 2026/27 | 15% above £5,000 a year |
| Minimum wage from age 21 | £12.71 an hour (since April 2026) |
| Workplace pension | compulsory from the first employee, employer at least 3% |
| Year end | P60 by 31 May, P11D by 6 July |
Do you have to run payroll as an employer from abroad?
In the UK income tax on pay runs through PAYE: the employer deducts income tax and employee National Insurance from pay and pays both, with its own contribution, to HMRC. But PAYE has a territorial limit. Only an employer with a sufficient presence in the UK that HMRC can enforce against must operate it.
HMRC describes what counts as presence: a branch, an agency or a representative office in the UK is enough. Employees alone do not create a presence. A field salesperson visiting customers from their flat in Birmingham does not automatically make your company abroad liable to operate PAYE. Whether you have a permanent establishment for corporation tax is a different question, covered in branch or subsidiary.
Three set-ups are most common in practice. First: you set up a UK subsidiary that employs; then it is the employer and runs payroll. Second: your employee stays employed by you but works for a UK company; then that company must apply PAYE to your payments, unless you take it on voluntarily. Third: you have nothing in the UK except the employee; then you can operate PAYE voluntarily, or your employee pays their tax to HMRC directly under a direct collection scheme.
For National Insurance the rules are stricter than for income tax. Even a registered office in the UK counts as a place of business, though nothing happens there. And under the social security arrangements an employer from the EU or Switzerland owes the employer contribution even without a UK site, once its employee is liable to UK contributions. Whether that applies to you depends on the posting; more in posting staff to the UK.
Checklist: before the first working day
Hiring in the UK has a clear order. These six points should be done before your employee starts, or at the latest before the first pay.
- 1
Check the right to work
You must check the right to work in the UK before employing someone: online via a share code, from original documents or through a certified identity service provider. British and Irish citizens have no share code; you check their passport. Keep copies during employment and for two years after. Without a correct check a civil penalty threatens.
- 2
Settle the visa if the employee comes from the EU or Switzerland
Anyone coming from the EU or Switzerland to work in the UK since 2021 usually needs a visa, and you as employer a sponsor licence. How that works is in the sponsor licence.
- 3
Hand over written terms
In the UK an employment contract arises once the offer is accepted, even orally. But the employee must have the principal statement of the main terms in writing on the first day, and the wider written statement within two months. Have the contract itself drafted by a UK lawyer, because UK employment law is not your home country's.
- 4
Register as employer with HMRC
Registration must happen before the first payday, but not more than two months before. The PAYE reference then arrives by post. Even a company that only pays its own director must register.
- 5
Payroll software and tax code
RTI reports only go through payroll software. For the new employee you need their National Insurance number and tax code; if they bring a P45 from a previous employer, the code is on it.
- 6
Prepare the pension duty
The workplace pension duty starts with the first employee. So choose the pension provider before the first payday, not afterwards.
RTI: what happens every month
Real Time Information means what it says. With every payment you send a Full Payment Submission (FPS) to HMRC on or before payday. It shows gross pay, tax, National Insurance and pension deductions per employee. Each employee gets a payslip on or before payday.
The Employer Payment Summary (EPS) supplements the FPS. You send it by the 19th of the following month if you claim deductions, for example for statutory payments, and instead of an FPS if you paid nobody in a month.
With monthly payment you pay by the 22nd of the following tax month, by cheque by the 19th. The UK tax year starts on 6 April, so tax months run from the 6th to the 5th. For a late or missing FPS HMRC sends reminders and can charge penalties.
The figures for 2026/27
You need these values to cost a UK salary. They apply in the tax year from 6 April 2026 to 5 April 2027, the minimum wage from 1 April.
| Item | Value |
|---|---|
| National Living Wage from age 21 | £12.71 an hour; from April 2027 £13.21 |
| Minimum wage age 18 to 20 | £10.85 an hour |
| Under 18 and first-year apprentices | £8 an hour |
| Employer National Insurance | 15% on pay above £5,000 a year |
| Employment Allowance (relief on employer contributions) | £10,500, not for companies whose only employee above the threshold is the director |
| Personal allowance | £12,570 |
| Workplace pension, employer share | at least 3% of qualifying earnings, usually on pay between £6,240 and £50,270 |
| Statutory Sick Pay | £123.25 a week or 80% of average pay, whichever is lower, for up to 28 weeks |
| Class 1A National Insurance on benefits | 15% |
GOV.UK: National Minimum Wage rates; Rates and thresholds for employers 2026 to 2027; CWG2 2026 to 2027; Workplace pensions; Statutory Sick Pay employer guide
Workplace pensions: automatic enrolment
The principle: you must automatically enrol every employee in a pension scheme who is between 22 and state pension age, earns at least £10,000 a year and normally works in the UK.
You pay in at least 3 percent of qualifying earnings, the employee the rest up to the scheme's total contribution. You deduct contributions through payroll and pay them to the scheme by the 22nd of the following month. If someone becomes eligible over time, for example on turning 22, you have six weeks to enrol them and write to them. So the pension belongs in the same software as payroll, not in a separate spreadsheet.
At year end: P60, P11D and what changes in 2027
The last FPS of the tax year goes in on or before the last payday before 5 April. By 31 May each employee receives their P60, the annual certificate of pay and tax.
Benefits in kind such as company cars, medical insurance or a cheap loan are reported by 6 July on the P11D and the P11D(b) summary, and by 22 July you pay 15 percent Class 1A National Insurance on them. A late P11D(b) costs £100 per 50 employees or part thereof per month.
From 6 April 2027 this changes for the most common benefits: company cars, vans, fuel and medical insurance must then be taxed through payroll as you go, most other benefits from April 2028. The government has announced this and started the legislation. How company cars are valued in the UK is in company car tax.
Frequently asked questions about UK payroll
Can my payroll at home handle the UK payroll too?
Technically rarely. RTI reports only run through HMRC-recognised software, and the rules on tax codes, National Insurance and pensions are their own. The usual set-up is a UK payroll whose results your accounts at home take over.
My only UK employee is the director of my limited company. Do I still have to run payroll?
Yes. Even a company that only pays its director registers as an employer. The Employment Allowance is not available in that case, though. Whether salary or dividend pays more is worked through in salary or dividend.
How much does an employee in the UK cost beyond salary?
Allow for 15 percent employer contributions on pay above £5,000, the pension contribution of at least 3 percent of qualifying earnings and the cost of payroll. The Employment Allowance can cut employer contributions by up to £10,500 a year if you are eligible.
What if I pay the first salary before the PAYE reference arrives?
You still run payroll, save the FPS and submit it once the reference arrives. HMRC describes exactly this route.
Do I need an employment contract under UK law?
For employment in the UK, yes. Minimum wage and written terms from day one are legal duties there, wherever the employer is based. A UK lawyer drafts the contract.
Sources: HMRC PAYE Manual PAYE81610: employer's presence in UK; GOV.UK: Globally mobile employees and PAYE; GOV.UK: CWG2 Employer further guide to PAYE and NICs 2026 to 2027; GOV.UK: Register as an employer; GOV.UK: Running payroll; GOV.UK: Rates and thresholds for employers 2026 to 2027; GOV.UK: National Minimum Wage and National Living Wage rates; GOV.UK: Checking a job applicant's right to work; GOV.UK: Written statement of employment particulars; GOV.UK: Workplace pensions for employers; GOV.UK: Payroll annual reporting; GOV.UK: Employer reporting of expenses and benefits; GOV.UK: Mandatory reporting of benefits in kind in RTI from April 2027
