Registering as an employer with HMRC

Q: What does the first month look like?

Illustration only. A new company plans to pay its first employee and its director on 30 June 2026. The earliest it can register is two months before, so it registers in early May, which gives time for the reference letter and PAYE Online activation code. It collects the employee's P45, sets both people up in payroll software and sends its first FPS on or before 30 June. That payday falls in the tax month running from 6 June to 5 July, so the tax and National Insurance are due to HMRC by 22 July if paid electronically. If the company qualifies for Employment Allowance, it claims it on an Employer Payment Summary.

You must register with HMRC as an employer before your first payday, but no more than two months before you start paying people. Registration gives you an employer PAYE reference and an Accounts Office reference by letter, and you then need payroll software, PAYE Online access and your employees’ details in place so the first Full Payment Submission can go on or before payday.

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Who has to register as an employer?

HMRC says you normally need to register when you start employing staff, or when you start using subcontractors for construction work under the Construction Industry Scheme. The registration page adds that you must register even if you are only employing yourself, for example as the only director of a limited company.

HMRC’s PAYE guide for employers lists the tests. You must register for PAYE if any of the following applies to an employee in the current tax year (since 6 April):

they are paid £96 or more a week;
they get expenses and company benefits;
they are getting a pension;
they have had another job;
they have received Jobseeker’s Allowance, Employment and Support Allowance or Incapacity Benefit.

If none of these applies, you do not need to register, but you must still keep payroll records. Once you run a scheme, every person you pay goes on your Full Payment Submission, even if they earn less than £96 a week.

Before any of this, check that the person really is an employee. HMRC warns that if you treat an employee as self employed and get it wrong, you may have to pay extra tax, National Insurance, interest and a penalty.

When should you register?

The two timing rules are simple: register before the first payday, and not more than two months before you start paying people. Your employer PAYE reference arrives by letter, so leave enough time for post.

If payday comes before the reference does, HMRC’s guidance is to run payroll as normal, store the Full Payment Submission, and send it late once the reference arrives, using late reporting reason code G. New employers also have some protection from penalties: HMRC will not charge a late filing penalty if your first FPS is sent within 30 days of paying an employee.

There is a trap in the other direction. HMRC will close your PAYE scheme if you are a new employer and you do not send a report to, or pay, HMRC within 120 days. If you register early and then delay hiring, send an Employer Payment Summary for each month in which you pay nobody.

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How do you register?

Most limited companies with one to nine directors can register online through HMRC’s Register an employer for PAYE service. Other types of business follow the route HMRC’s eligibility questions direct them to. You can return to an online application you have already started.

Registering online also enrols you for PAYE Online. HMRC posts an activation code within 10 days and you must activate the account within 28 days of the date on the letter, or enrol again. If you registered by phone or post you must enrol for PAYE Online separately. PAYE Online is where you see what you owe, receive tax code notices (P6 and P9) and student loan notices (SL1 and SL2), and appeal penalties.

What must be in place before the first payday?

HMRC’s checklist for setting up payroll is:

Register as an employer and get a login for PAYE Online.
Choose payroll software that can report online, unless you are exempt from online filing. HMRC’s free Basic PAYE Tools is designed for businesses with fewer than 10 employees.
Collect and keep records.
Tell HMRC about your employees. You need each new starter’s date of birth, gender, full address and start date, plus their P45 or a completed starter checklist to work out the tax code.
Record pay, make deductions and report to HMRC on or before the first payday, using a Full Payment Submission.
Pay HMRC the tax and National Insurance you owe.

The GOV.UK step by step for employing someone for the first time also includes checking you can afford the costs (the National Minimum Wage, employer National Insurance, sick pay and parental pay), checking a person’s right to work in the UK, setting up workplace pension auto enrolment, and getting employers’ liability insurance.

Can someone else run payroll for you?

Yes. You can pay a payroll provider such as a bureau or accountant, or run payroll yourself. HMRC is clear that as the employer you are legally responsible for completing all PAYE tasks, even if you pay someone else to do them, and you remain responsible for collecting and keeping your employees’ details. That also limits what you can argue on appeal: relying on another person is not a reasonable excuse for a late return unless you took reasonable care to avoid the failure.

What records must you keep?

You must keep records of what you pay employees and the deductions you make, the reports you send HMRC, payments you make to HMRC, leave and sickness absences, tax code notices, taxable expenses or benefits, and Payroll Giving documents. Keep them for three years from the end of the tax year they relate to. New starter information from a P45 or starter checklist must be kept for the current and next three tax years. If you do not keep full records, HMRC may estimate what you owe and charge a penalty of up to £3,000.

What does the first month look like?

Illustration only. A new company plans to pay its first employee and its director on 30 June 2026. The earliest it can register is two months before, so it registers in early May, which gives time for the reference letter and PAYE Online activation code. It collects the employee’s P45, sets both people up in payroll software and sends its first FPS on or before 30 June. That payday falls in the tax month running from 6 June to 5 July, so the tax and National Insurance are due to HMRC by 22 July if paid electronically. If the company qualifies for Employment Allowance, it claims it on an Employer Payment Summary.

What are the common mistakes?

Trying to register more than two months ahead, or leaving it until the week of payday.
Paying staff in cash before registration and never reporting it.
Letting the online activation code expire, which means enrolling for PAYE Online again.
Registering, then hiring nobody and sending nothing, so the scheme is closed after 120 days.
Assuming a bureau’s mistakes are the bureau’s problem rather than the employer’s.
Treating workers as self employed without checking their status.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.