Running Payroll for the First Time: A Beginner’s Guide for UK Business Owners

Starting a business is an exciting journey, but when it comes to taking on your first employee, the excitement often gets interrupted by confusio especially around payroll. If you’re running payroll for the first time, you're not alone. Many small business owners feel overwhelmed by the jargon, deadlines, and compliance requirements. But don’t worry this blog breaks it down in simple terms so you can get it right from day one.

Step 1: Register with HMRC

Before you can run payroll, you need to register as an employer with HMRC. This applies even if you're only paying yourself as a director of a limited company. Registration can be done online and may take up to 5 working days to receive your PAYE reference number.

Top tip: Register at least two weeks before your first payday to avoid delays.

Step 2: Choose a Payroll System

You have a few options when it comes to processing payroll:

• Do it manually using HMRC’s Basic PAYE Tools (ideal for very small teams)

• Use payroll software like BrightPay, QuickBooks, or Sage.

• Outsource payroll to a specialist (like us!) who handles everything for you

If you’re new to payroll, using a system or outsourcing can save you hours of stress and help avoid costly mistakes.

Step 3: Collect Employee Details

To pay your employee legally and accurately, you’ll need:

• Full name and address

• National Insurance number

• Date of birth

• Tax code and P45 (if applicable)

• Bank account details

• Employment start date

Make sure to keep these records secure and up to date.

Step 4: Calculate Pay and Deductions

When running payroll for the first time, this is the part most people find intimidating. Here’s what you need to calculate:

• Gross pay (hourly wage × hours worked or agreed salary)

• Income tax based on the employee’s tax code

• National Insurance contributions

• Student loan repayments, if applicable

• Workplace pension contributions

Most payroll software does this for you automatically. If you're outsourcing, your provider will handle it all.

Step 5: Send RTI Submissions to HMRC

Each time you pay an employee, you need to send a Full Payment Submission (FPS) to HMRC, reporting what you've paid and what deductions you've made. This must be submitted on or before payday.

Step 6: Provide Payslips

Legally, you're required to give each employee a payslip on or before their payday. It must clearly show:

• Gross pay

• Deductions

• Net pay

• Any additional information like bonuses or expenses

Step 7: Make Payments

You’ll need to:

• Pay your employee (usually via bank transfer)

• Pay HMRC for tax and National Insurance contributions, typically by the 22nd of each month

Missed payments or errors can result in penalties, so staying on top of deadlines is key.

The Easier Way: Outsourcing Running Payroll

If all of the above sounds like a full-time job that's because it kind of is! That's why so many small businesses in the UK are choosing to outsource payroll. It removes the pressure, ensures full compliance, and lets you focus on growing your business.

By outsourcing, you’ll benefit from:

• Peace of mind knowing everything’s submitted correctly and on time

• Fewer admin hours each month

• A fixed, affordable monthly cost

• Access to payroll experts who can answer any questions

Final Thoughts

Running payroll for the first time doesn’t have to be scary. Yes, there are rules and regulations to follow but with the right tools or support, it’s entirely manageable. And if you ever feel like it’s taking too much time or brain space, remember: outsourcing payroll is a smart, scalable solution.

Want to chat about how we can take payroll off your plate? Get in touch with us today!