UK payroll: PAYE registration and real time information
UK payroll runs on a shorter cycle than almost any other tax obligation. Submissions are due on or before every payment, which means a payroll error is a monthly or weekly event rather than an annual one.
Register before the first payment
PAYE registration must be completed before you first pay anyone. This includes yourself, if you are a director taking salary.
Registration is not instant. The employer PAYE reference and accounts office reference arrive separately and take time, and you cannot run a compliant payroll without them.
Founders who incorporate in March, plan to start paying themselves in April, and begin the registration in late March routinely miss their first pay date.
Real time information
Under RTI you report to HMRC on or before each payment, not annually.
Two submission types cover most situations:
- Full Payment Submission (FPS) — reports what each employee was paid and what was deducted, submitted on or before the pay date.
- Employer Payment Summary (EPS) — reports adjustments such as statutory payments reclaimed, or tells HMRC there were no payments in a period.
Late submissions attract penalties in their own right, independently of whether the tax was calculated correctly. Getting the numbers right and the timing wrong still costs money.
We prepare accounts, Corporation Tax and Self Assessment work with a UK-qualified professional on the engagement.
Avail our UK tax desk servicesTell them about nil periods
If you pay nobody in a period, submit an EPS saying so rather than submitting nothing.
Silence is indistinguishable from a missed submission. HMRC may raise an estimated charge and a penalty, and unwinding that is far more effort than the nil declaration would have been.
This catches small companies whose director takes an annual rather than monthly salary — eleven quiet months that look like eleven failures.
Directors are a special case
Directors have their own National Insurance calculation method, based on an annual earnings period rather than the pay-period basis used for other employees.
Payroll software handles this if the person is correctly flagged as a director. If they are not, the calculation is wrong all year and corrects itself awkwardly at the end.
Check the flag when setting up. It is a one-click setting that produces twelve months of errors if missed.
Salary and dividends together
Most owner-managed companies use a mix: a salary at a level that is efficient given the National Insurance thresholds, with the balance drawn as dividends.
That structure requires an operating PAYE scheme even where the salary is modest, and it requires the dividend side to be documented properly — declared from distributable reserves, with the paperwork to show it.
Outsource it
Payroll is frequent, penalised and highly automatable. For most small companies a payroll provider or good software costs less than a single penalty cycle and removes an entire category of recurring risk.
Tie each RTI submission to the payment run
For every payday, retain employee master changes, gross-to-net report, Full Payment Submission response and bank payment. Starters need the correct declaration and year-to-date basis; leavers need a final payment and P45 process. Do not wait for month end if the normal RTI deadline is on or before payment.
Reconcile tax, National Insurance, student loans and other deductions to the PAYE account and remittance. Use an Employer Payment Summary where the relevant adjustment or no-payment condition applies, and record why. After corrections, compare cumulative figures with payslips and the final year-end record employee by employee; repeated ad hoc amendments can leave HMRC and payroll software with different totals.
Sources
This guide is written against the official and clearly labelled professional references below. Rates, thresholds and portal procedures change between reviews, so open the primary source before relying on a figure.
Questions people also ask
When must I register for PAYE?
Before the first payment to an employee. Registration takes time because the employer reference arrives separately, so starting the process only when payday approaches is leaving it too late.
Do directors need to be on payroll?
If a director takes salary, yes. A director paid only in dividends is a different position, but the salary-and-dividend mix most owner-managers use requires an operating PAYE scheme.
What does real time information mean?
Submissions must be made to HMRC on or before each payment to an employee, rather than annually. Late submissions attract penalties independently of whether the tax was correct.
What is the difference between an FPS and an EPS?
A Full Payment Submission reports payments and deductions each pay run. An Employer Payment Summary reports adjustments such as reclaimed statutory payments, or confirms a nil payment period.
Do I file in a month with no payments?
You should notify HMRC of a nil payment period rather than simply submitting nothing. Silence looks like a missed submission and can generate penalties and estimated charges.
Send the tax year and the transaction or filing involved, and we will tell you what is actually required.
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