Payroll for your first employee, and the software that runs it
This section is for landlords, sole traders and small companies taking on their first employee. Once you employ someone, you register with HMRC as an employer before the first payday, and from then on payroll software reports what you pay to HMRC on or before each payday. Here we explain what HMRC asks of an employer, what the software has to do, and where HMRC lists the software it recognises, including free products for businesses with fewer than 10 employees.
What HMRC asks of an employer
As an employer, you normally have to operate PAYE as part of your payroll. PAYE is HM Revenue and Customs’ (HMRC) system to collect Income Tax and National Insurance from employment.
Registering comes first. You normally need to register as an employer with HM Revenue and Customs (HMRC) when you start employing staff, or using subcontractors for construction work. You must register before the first payday to get your employer PAYE reference number. This will be sent to you in a letter. You cannot register more than 2 months before you start paying people.
You then decide how payroll will run. GOV.UK says that you can operate PAYE by either paying a payroll provider to do it for you or doing it yourself using payroll software. Whichever you choose, the responsibility stays with you. As an employer, you’re legally responsible for completing all PAYE tasks - even if you pay someone else to do them.
The guide to taking on your first employee goes through registration and the first payday step by step.
What payroll software has to do
If you decide to run payroll yourself, you need payroll software to report to HM Revenue and Customs (HMRC). The software will help you with tasks like:
- recording your employees’ details
- working out your employees’ pay and deductions
- reporting payroll information to HMRC
- working out how much you need to pay HMRC
- calculating statutory pay, for example maternity or sick pay
You must get payroll software that reports PAYE information online, unless you’re exempt. Not every product does everything, which is why it helps to check before you choose. You should also consider which other features you need. For example, some software will not let you:
- produce payslips
- record pension deductions
- make pension payments
- pay different people over different periods (for example both weekly and monthly)
- send an Employer Payment Summary (EPS) report or Earlier Year Update (EYU) to HMRC
The dates each payroll runs to
Payroll follows the tax month rather than the calendar month. Tax months run from the 6th of one month to the 5th of the next. Within each one, GOV.UK sets these dates.
| What you do | When |
|---|---|
| Send a Full Payment Submission | On or before each payday |
| Send an Employer Payment Summary, if you need one | By the 19th of the following tax month |
| Pay HMRC what you owe | By the 22nd of the next tax month, or the 19th if you pay by cheque through the post |
A small employer may be able to pay less often. If you usually pay less than £1,500 per month, you may be able to pay quarterly instead of monthly. Contact the payment helpline to find out. The guide to reporting payroll in real time explains each report, and the guide to payroll deadlines and penalties covers what happens when one is late.
HMRC’s list of payroll software
HMRC publishes one list of the payroll software it recognises, and introduces it like this: “This payroll software is recognised by HMRC. You can use it to report PAYE to us online.” The list gives each supplier and product name and nothing more, so it shows no prices and does not compare features. We have not yet checked products in this area ourselves, which is why this section names none of them.
The list starts with the free products. This free payroll software is recognised by HMRC for businesses with fewer than 10 employees.
The guide to free payroll software sets out what to check before you pick one.
Workplace pensions begin with the first employee
Pensions are part of payroll from the start. Employers have to provide a workplace pension scheme for eligible staff as soon as their first member of staff starts working for them (known as your ‘duties start date’). The Pensions Regulator adds: “Your workplace pension legal duties begin on the day your first member of staff starts work. This is known as your duties start date. Even if you think you won't need to put your staff into a scheme, you'll still have duties.”
The guide to workplace pensions and payroll sets out what GOV.UK and The Pensions Regulator say an employer must do. Acrenvo does not name, compare or recommend pension schemes or providers.
Guides in this section
These guides are for landlords, sole traders and small companies taking on their first employee, or running payroll for a few staff.
About 8 minutes to read
Taking on your first employee: registering as an employer and what payroll involves
When you take on your first employee, HMRC expects you to register as an employer before the first payday and to run payroll from then on. This guide sets out what GOV.UK says about registering, the choice between running payroll yourself and paying someone to do it, and the National Insurance and pension duties that begin with the first person you employ.
About 7 minutes to read
Reporting payroll in real time: what your software sends to HMRC, and when
HMRC expects employers to report payroll in real time, so your payroll software sends a report to HMRC on or before each payday. This guide explains the Full Payment Submission and the Employer Payment Summary, the dates in each tax month that GOV.UK sets, and what happens when a report is missing.
About 6 minutes to read
Free payroll software for employers with fewer than 10 employees
HMRC's list of payroll software includes free products for businesses with fewer than 10 employees. This guide explains what HMRC says about that list, what payroll software has to do, and the features to check before you choose, because HMRC does not recommend any one product.
About 7 minutes to read
Payroll deadlines and penalties: what happens if you report or pay late
Send each payroll report on or before payday and pay HMRC by the 22nd of the month, or the 19th if paying by post. A late report can cost £100 to £400 a month, by number of employees.
About 7 minutes to read
Workplace pensions and payroll: what an employer must do
Your workplace pension duties begin on the day your first employee starts work, even if nobody needs to be enrolled straight away. This guide sets out what GOV.UK and The Pensions Regulator say an employer must do, how contributions run through payroll, and the dates involved. It does not name, compare or recommend any pension scheme.
This is general information, not tax, payroll, pensions or legal advice. For advice on your own business, speak to an accountant, a payroll adviser or a tax adviser. GOV.UK’s pages were last read on 21 October 2026.