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How to Run Payroll in the UK: A Step-by-Step Guide

A practical, step-by-step guide to running UK payroll — from registering as an employer and collecting employee details to calculating pay, producing payslips, submitting your FPS and paying HMRC.

Running payroll in the UK means calculating what each employee is owed, deducting the right tax and National Insurance, paying your people correctly and on time, and reporting it all to HMRC. Once it is set up, most of it follows the same predictable cycle every pay period.

This guide walks through the complete process so you know what happens at each stage and where to find more detail.

Before your first pay run

A few things need to be in place before you can pay anyone.

Register as an employer with HMRC and get your PAYE and Accounts Office references. If your first payday is arriving before your reference does, see late PAYE registration.
Choose payroll software that is recognised by HMRC so you can calculate deductions and send reports.
Check right to work for every new starter and set up your workplace pension duties.

If you are hiring for the first time, work through the new employer compliance checklist first.

Step 1: Collect employee information

For each employee you need their personal details, National Insurance number, tax code and starter information (usually from a P45 or a starter declaration). This determines how much tax and National Insurance to deduct.

Step 2: Record pay and hours

For each pay period, gather what each person should be paid — salary, hours worked, overtime, commission, bonuses, and any statutory payments such as sick pay or family leave. Accurate hours are the foundation of an accurate pay run, which is why many employers sync time and attendance straight into payroll.

Step 3: Calculate deductions

Your payroll software calculates the deductions from gross pay:

Income Tax through PAYE, based on each employee's tax code;
employee and employer National Insurance contributions;
workplace pension contributions;
student loan repayments and any other deductions that apply.

The result is each employee's net (take-home) pay.

Step 4: Produce payslips

You must give every employee an itemised payslip on or before payday. It shows gross pay, deductions and net pay. Payslips can be printed or delivered digitally through a payroll app.

Step 5: Submit a Full Payment Submission (FPS)

On or before the day you pay your employees, send a Full Payment Submission (FPS) to HMRC through your payroll software. This reports each employee's pay and deductions in real time.

If you need to reclaim statutory payments or tell HMRC that no one was paid in a tax month, you may also need an Employer Payment Summary — see no-pay month: FPS or EPS?.

Step 6: Pay your employees and HMRC

Pay each employee their net pay by your chosen payday. Then pay HMRC what you owe — the tax and National Insurance you deducted, plus employer National Insurance — by the monthly (or quarterly) deadline. Keep an eye on the 2026/27 payroll calendar so payments and reports are never late.

Step 7: Keep records

Keep your payroll records for at least three years from the end of the tax year they relate to. That includes what you paid, the deductions you made, reports sent to HMRC, and employee leave and absence.

Keeping payroll simple

Most payroll errors come from manual steps — rekeying hours, missing a deadline, or spotting a variance too late. Modern payroll software connects hours, holiday and employee records so each pay run is accurate before you submit. To go deeper on specific tasks, explore the run payroll resources or the full UK payroll glossary.