How to Do Payroll Yourself in the UK: A Complete Guide

You can do your own payroll in the UK, but you’ll need to register as an employer with HMRC, choose payroll software, and report pay, tax, and National Insurance (NI) to HMRC every time you pay someone. 

Payroll gets more complex as your team grows, so you may eventually need an accountant. Still, for a sole director or one or two employees, it's mostly software doing the calculations and you checking the figures.

Here’s how to do payroll yourself in the UK, from calculating pay and deductions to staying on top of HMRC deadlines and avoiding costly mistakes.

Key points

• Get your HMRC registration and payroll setup right 📋
  If you're required to operate PAYE, you'll need to register as an employer and keep your PAYE reference and Accounts Office reference to hand. You'll also need HMRC-recognised payroll software that can submit Real Time Information (RTI).
• Know the rates, deductions and pension rules 💷
  Your payroll calculations need to account for Income Tax, employee, employer NI minimum wage requirements, and workplace pension contributions. Using the correct 2026/27 thresholds is essential to avoid underpaying employees or getting your HMRC payments wrong.
• Don't overlook employer costs and reliefs 💰
  Your payroll costs can include employer NI and pension contributions on top of employees' wages. Depending on your circumstances, Employment Allowance and Small Employers' Relief could help reduce the cost of employing staff.
• ANNA can take the work out of payroll 🚀
  Instead of calculating deductions and managing payroll records manually, you can have ANNA calculate PAYE and submit payroll information to HMRC. ANNA also brings together your business account, bookkeeping, invoicing, and tax filing, helping you manage your finances easily.

Do you need to register as an employer?

If you're paying anyone, including yourself as a director, £129 or more a week, you need to register as an employer with HMRC and set up PAYE. This applies even if you're the only person on the payroll.

You can register online through GOV.UK. Before you start, make sure you have the following details to hand:

• Business or company name
• Business address
• Type and nature of your business
• Date you plan to start paying employees
• Contact name, phone number, and email address
• Company registration number, if you run a limited company
• Corporation Tax Unique Taxpayer Reference (UTR), if you run a limited company
• National Insurance number, if you’re a sole trader

Once you've registered, HMRC will send you a PAYE reference number and Accounts Office reference number. You'll need these to report your payroll information and make PAYE payments to HMRC.

What about sole traders?

If you're a sole trader hiring an employee, the process is the same as for a limited company, though you won't need a company registration number or Corporation Tax UTR. 

However, you will need to provide information on any expenses or benefits you provide, since that affects whether you need to report them on a P11D form or set up a PAYE Settlement Agreement later on.

Choosing payroll software

HMRC requires you to report pay information every time you run payroll. 

This system is known as Real Time Information, or RTI. Your payroll software submits these reports to HMRC directly, so you don’t need to calculate and enter figures yourself.

Still, you need software that's HMRC-recognised and can handle RTI submissions correctly.

Other useful payroll software features to look for include:

• Automatic Income Tax and NI calculations
• Payslip generation
• Form P45 and Form P60 generation
• Pension contribution calculations and reporting

Check the employee cap and included features before you commit, since these are where cheaper options tend to fall short.

💡 Did you know? 

ANNA Payroll is HMRC-recognised software built for small businesses with up to 5 employees. It calculates PAYE, NI, and pension contributions automatically, generates payslips, P45s, and P60s, and stores everything securely in your account.

The rates and thresholds you need to know for 2026/27

If you're running payroll yourself, you need to use the correct tax and NI rates and thresholds for the 2026/27 tax year. 

Income Tax comes out of employees' pay through PAYE. These bands apply in England, Wales and Northern Ireland:

You deduct employee NI from their pay and pay employer NI, working out both figures against these thresholds:

Whatever you pay employees has to meet the minimum wage for their age. These rates apply from 1 April 2026:

Setting up automatic enrolment

If you employ staff, you generally need to assess them for workplace pension automatic enrolment. This means checking their age and earnings to see whether they have to be enrolled into a pension scheme.

For 2026/27, the key figures are:

• £10,000 a year: The earnings trigger for automatic enrolment
• £6,240 to £50,270: The qualifying earnings band used to calculate pension contributions
• 22 to State Pension age: The age range for automatic enrolment, provided the employee earns over £10,000

If an employee is aged 22 to State Pension age and earns more than £10,000 a year, you need to automatically enrol them into a qualifying workplace pension and pay the required employer contribution.

Employees who earn between £6,240 and £10,000 a year can opt into a workplace pension. If they do, you have to make an employer contribution too.

Employees who earn below £6,240 can also ask to join a pension scheme, but you don't have to pay employer contributions for them.

How to do payroll by yourself in the UK

Once you're registered and set up with software, running payroll follows the same basic pattern each pay period:

• Work out gross pay for each employee based on their salary, hours worked, or whatever agreement you have with them
• Calculate deductions, including Income Tax through PAYE, employee NI, and any pension contributions or student loan repayments that apply
• Work out employer costs, such as employer NI and employer pension contributions, which sit on top of what you pay the employee
• Submit a Full Payment Submission to HMRC on or before payday, telling HMRC what you've paid and what you've deducted
• Pay your employees their net pay, and issue a payslip showing gross pay, deductions, and net pay
• Pay HMRC what you owe in Income Tax and NI by the 22nd of the following month if you're paying electronically

Most payroll software handles steps one to four automatically once you've entered an employee's details and hours.

Employment Allowance and other reliefs

There are a couple of reliefs that can reduce the cost of running payroll for eligible small employers.

Employment Allowance

Employment Allowance can reduce your employer NI bill by up to £10,500 a year. It means you don't have to pay the first £10,500 of eligible employer Class 1 NICs.

Most small employers can claim it, but there’s an important exception for single-director companies. If a company has only one employee, that employee is the sole director, and their earnings are above the Employer NI Secondary Threshold (£5,000 a year in 2026/27), the company can’t claim Employment Allowance. 

The restriction applies because the allowance is intended to support employers with staff.

Small Employers' Relief

Small Employers' Relief helps eligible small employers recover more of the statutory payments they make to employees, such as Statutory Maternity Pay, Statutory Paternity Pay, and Statutory Adoption Pay.

You can qualify if your total Class 1 NICs in the previous tax year were £45,000 or less. Instead of reclaiming only the statutory payment itself, qualifying employers can reclaim 100% of the payment plus an additional 9% for 2026/27 to help cover the employer's NI costs.

How ANNA helps you run payroll

Once you're juggling tax, NI, pensions, payslips and HMRC deadlines, payroll starts eating into your week. ANNA brings it all into one place and simplifies the process, so you can get back to running your business.

With ANNA, you can:

• Calculate PAYE and NI automatically, so you don't have to work out deductions manually
• Run payroll for up to five employees, including yourself as a company director
• Manage your money from a dedicated business account, with transactions and expenses organised in one place
• Use Auto Accountant to automate your bookkeeping, including categorising transactions and keeping your records up to date
• Create, send, and track invoices, so you can manage your sales and payments alongside your accounts
• Capture and categorise receipts and expenses, making it easier to keep accurate records and claim allowable business expenses
• Get help with tax and accounting, including Self Assessment, Corporation Tax, VAT returns and confirmation statements
• Get 24/7 UK-based support when you need help with your account or payroll

Get started with ANNA today and put payroll on autopilot.