Payroll is one of the core administrative responsibilities for UK employers. It involves calculating pay, deducting tax and National Insurance Contributions (NICs), reporting to HMRC, and meeting statutory deadlines. Getting payroll right protects your employees and keeps your business compliant.
Payroll affects:
Employee pay
Income tax (PAYE) and National Insurance
Pension contributions
HMRC reporting
Workplace benefits
Errors in payroll can lead to:
Penalties from HMRC
Underpaid or overpaid employees
Incorrect tax and NIC reporting
Employee dissatisfaction
Good systems and procedures ensure accuracy and compliance.
Before you pay anyone:
Register as an employer with HMRC
Set up a payroll scheme
Choose payroll software compatible with Real Time Information (RTI)
Employer registration must be done even if you are only paying yourself as a director.
PAYE is the system through which employers deduct:
Income Tax
Employee National Insurance Contributions (NICs)
Student loan repayments (if applicable)
These deductions are made from employee pay before it is paid out.
Under the RTI system:
You report payroll information to HMRC each time you pay employees
Information includes earnings, tax, NICs and benefits
Reports must be submitted on or before the payroll date
RTI ensures HMRC has up‑to‑date records of employee payments and deductions.
To calculate net pay:
Start with gross pay (salary, wages, bonuses)
Deduct employee Income Tax under PAYE
Deduct employee NICs
Deduct student loan or other statutory deductions
Add any approved benefits (taxable if applicable)
The remaining amount is the employee’s net pay — the money paid into their bank.
Employers must calculate and pay:
Employer NICs on employee earnings above thresholds
Employee NICs deducted at source via payroll
NIC rates and thresholds are set by HMRC and change periodically. Both employer and employee contributions must be reported through RTI.
Most employers must automatically enrol eligible employees into a workplace pension and make employer contributions.
Key points:
Employees must be informed of their enrolment rights
Contributions are deducted from pay and remitted to a pension provider
Your payroll system must integrate pension calculations
Applegrow can help ensure your payroll and pension processes work smoothly together.
Employees are legally entitled to a payslip showing:
Gross pay
Deductions (tax, NICs, student loan etc.)
Net pay
Payroll records must be kept for at least three years and should be accurate and accessible in case of HMRC enquiries.
Your payroll processes should also handle statutory pay where applicable:
Statutory Sick Pay (SSP)
Statutory Maternity, Paternity and Adoption Pay
Shared Parental Pay
Correctly calculating and reporting these payments helps ensure compliance.
Most businesses use payroll software to:
Automate calculations
Generate RTI reports
Produce payslips
Keep digital records
Software must be compatible with HMRC’s RTI system. Applegrow can advise on the right payroll solutions for your business.
Key payroll deadlines include:
RTI submissions on or before each pay date
Employer PAYE payments to HMRC by the 19th of the following tax month
Annual forms, such as P11D (expenses and benefits) where needed
Late submissions or payments can lead to penalties and interest charges.
Payroll compliance can be complex, especially if you employ staff for the first time.
Applegrow Financial Advisors can support you with:
Payroll setup and RTI registration
Choosing and configuring payroll software
Pension auto‑enrolment compliance
PAYE, NICs and statutory deduction calculations
Year‑end reporting and employee payslips
With our guidance, you can run payroll accurately, meet HMRC obligations, and keep your employees paid on time.
Contact Applegrow Financial Advisors today for tailored support with UK payroll compliance and reporting!
