Can a small business run payroll without an accountant?

Yes, a small business can run payroll itself if it uses compliant software and follows HMRC rules carefully. Many small employers do this in-house, but they still need good processes and a reliable payroll calendar.

What do I need if an employee has no P45?

If an employee has no P45, use the HMRC Starter Checklist. That helps you apply the right starter declaration and tax treatment instead of guessing.

When do I send payroll information to HMRC?

You usually send a Full Payment Submission on or before the date you pay employees. An Employer Payment Summary is sent separately when adjustments or claims need reporting.

Do I need to set up a workplace pension as a small employer?

In most cases, yes. Automatic enrolment duties still apply to small employers, so you need to assess workers, enrol eligible staff and make contributions where required.

How to Run Payroll UK Small Business Guide

How to run payroll UK small business is one of the first compliance jobs a new employer must get right, because payroll errors can trigger HMRC penalties, tax corrections and unhappy staff from the very first pay day. The good news is that the process is manageable once the order of steps is clear.

This beginner guide explains how a small business runs payroll in the UK, from registering as an employer and choosing software through to tax codes, RTI submissions, pension duties and year-end tasks.

How to run payroll UK small business from the start

To run payroll in the UK, a small business usually needs to:

register as an employer with HMRC
choose payroll software
collect starter details
set up each employee correctly
calculate pay, tax and deductions
report pay to HMRC using Real Time Information
pay HMRC on time
keep payroll records

That sounds simple written down, but new employers usually make mistakes in the setup stage. A wrong start date, wrong tax code or missing National Insurance number can affect payslips, pension duties and year-end forms.

Payroll starts before the first payslip

Good payroll begins with clean starter data. If the employee does not have a P45, use the HMRC Starter Checklist rather than guessing tax details.

What information do you need before the first payroll run?

Collect these basics before you add someone to payroll:

full legal name and address
date of birth
National Insurance number
start date
pay rate and pay frequency
bank details
P45, if they have one
starter declaration if they do not have a P45
student loan and postgraduate loan details, where relevant
pension information

You also need to decide whether the worker is an employee, a worker or a contractor. Getting status wrong can create tax and employment law issues. If that area is unclear, read the employee vs contractor guide.

What do small businesses need to register for payroll in the UK?

Before you can submit payroll to HMRC, you need to register as an employer and get a PAYE reference and Accounts Office reference. Those references allow you to submit RTI reports and make PAYE payments.

Small businesses also need payroll software that can send RTI submissions to HMRC. Many employers use dedicated payroll systems, while others use accounting tools with payroll modules.

What payroll software should a small business choose?

The best software is the one that fits the business structure and the team's confidence level. At minimum, it should:

calculate PAYE and National Insurance
produce payslips
submit FPS and EPS reports
handle statutory payments where needed
support pension calculations
keep payroll records securely

If payroll is linked closely to accounting, employers often compare payroll within Xero or QuickBooks. If the business wants stronger HR workflow links, another integrated platform may work better.

How do you calculate pay, tax and deductions correctly?

Once the employee record is set up, payroll calculates:

gross pay
income tax under PAYE
employee National Insurance
employer National Insurance
pension deductions
student loan deductions where applicable
other authorised deductions such as salary sacrifice or attachment orders

Each pay period, the employer then gives the employee a payslip showing the key figures.

Never use an old tax code by default

If HMRC has not issued a new code and the employee has no P45, use the correct starter process and emergency code basis where required. Guessing creates avoidable corrections.

What RTI reports do you need to send?

For most payroll runs, the two reports employers need to know are:

Full Payment Submission (FPS) — sent on or before the date employees are paid
Employer Payment Summary (EPS) — used when needed for adjustments or claims, such as statutory payment recovery

RTI is not optional. Missing or late submissions can lead to penalties. This is why many employers also bookmark the PAYE real time information guide and the PAYE calculator 2026/27.

How do pensions and statutory payments fit into payroll?

Payroll is not just wages and tax. Employers also need to think about automatic enrolment, statutory sick pay, statutory maternity pay and similar items.

For workplace pensions, a small business must assess workers, enrol eligible staff and pay minimum contributions where required. Pension duties sit alongside payroll, not after it. Relevant background is in the workplace pension auto enrolment guide and the auto enrolment pension thresholds 2026 guide.

For sickness absence and family leave, payroll needs the right rules, dates and evidence. If the business is handling absence, it should also read statutory sick pay calculations and the SSP changes April 2026 guide.

When do you pay HMRC?

Most small employers pay HMRC monthly, although some can pay quarterly. HMRC payments usually cover:

PAYE income tax
employee NI
employer NI
student loan deductions
Construction Industry Scheme deductions, where relevant

Late payment can trigger interest and penalties, so the business should set a calendar reminder tied to each pay cycle. See the HMRC payroll penalties guide for more detail on how fines build up.

What records must a small business keep for payroll?

Payroll records matter for HMRC checks, employee queries and year-end reporting. Employers should keep records of:

gross pay and deductions
tax codes and notices
RTI submissions
pension assessments and contributions
statutory payment calculations
leave and absence records that affect pay

Secure record keeping also supports employment law. For example, a pay dispute or unlawful deduction claim is harder to defend if records are weak.

Xero

Xero can help small businesses run payroll, keep records together and reduce manual errors between bookkeeping and wages.

Compare payroll workflows →

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Use a payroll calendar, not memory

A simple payroll calendar with pay dates, cut-off dates, FPS submissions, pension dates and HMRC payment deadlines prevents many first-year mistakes.

Small business payroll checklist

Use this checklist each time a new payroll is set up.

Register as an employer with HMRC
Get PAYE and Accounts Office references
Choose payroll software and test the settings
Add each employee with full starter information
Use the right tax code process
Confirm pay frequency and pay dates
Check pension assessment rules
Run the payroll calculations
Issue payslips
Submit FPS on or before payday
Submit EPS where required
Pay HMRC by the deadline
Keep all payroll records and year-end documents

Frequently asked questions

Free Template: Small Business Payroll Setup Checklist

Download a practical startup checklist covering HMRC registration, starter data, payroll settings and reporting deadlines.

small-business-payroll-setup-checklist.pdf

Key takeaways

To run payroll UK small business correctly, start with registration, accurate employee setup, RTI discipline and a clear payroll calendar. Most payroll problems come from bad starter data, missed submissions or weak records rather than complex calculations. For related support, read the PAYE real time information guide, the UK national insurance rates 2026 guide and use the PAYE calculator 2026/27.