How to Register for PAYE and Set Up Payroll for Your First Employee

Taking on your first employee is an exciting step, but it also changes your responsibilities overnight. If you are wondering how to register for PAYE, when to do it and what happens next, you are not alone. Many growing businesses leave payroll too late, only to discover that HMRC registration, payslips, Real Time Information submissions and pension duties all need to be in place before the first payday.

The good news is that the process is manageable when you follow the right order. In this guide, we explain what first-time employers need to do, the common mistakes to avoid and when it makes sense to bring in professional payroll support.

Do you need to register for PAYE before hiring your first employee?

In most first-hire situations, yes. If you are employing someone and need to deduct Income Tax or National Insurance, you will usually need to register as an employer with HMRC before the first payday.

PAYE may also be required if:

• Your employee already has another job or receives a pension.

• You need to report payments and deductions to HMRC.

• You are operating a payroll for a director as part of a limited company structure.

• You need to deal with statutory payments, student loan deductions or pension contributions.

There are limited situations where PAYE may not apply straight away, but first-time employers should be careful. Fixing payroll after someone has been paid is usually far more time-consuming than getting it right from the start.

How to register for PAYE: step by step

1. Confirm your first payday

Your first payday sets the timetable for everything else. Do not treat PAYE registration as something to handle on the day you pay wages. You need enough time to register, receive your HMRC references and set up payroll properly.

As a rule, the earlier you prepare, the better. HMRC processing times can vary, and last-minute registration can create unnecessary pressure.

2. Register as an employer with HMRC

You register as an employer with HMRC online. During registration, you will typically need key business details, such as:

• Your business name and trading details.

• Your business address.

• Your company registration number or other relevant tax details, depending on your structure.

• The date you expect to pay your first employee.

• Information about the number of employees you expect to pay.

If your business is new and you are unsure which registrations should be completed first, our business start-up advice can help you put the right foundations in place.

3. Wait for your employer reference numbers

Once HMRC has processed your application, you should receive the reference numbers you need to operate payroll. These normally include:

• Your employer PAYE reference.

• Your Accounts Office reference.

You will use these references when filing payroll information with HMRC and when making PAYE payments. Keep them stored securely and make sure whoever runs payroll can access them.

4. Choose payroll software and create the employee record

After registration, the next step is setting up a payroll system. Even if you only have one employee, payroll still needs to be run accurately and reported correctly.

You will normally need to collect the following information for your employee record:

• Full name, address and date of birth.

• National Insurance number, if available.

• Start date.

• Pay rate and pay frequency.

• Bank details for salary payments.

• Tax code information from a P45 or starter checklist.

• Any relevant pension or student loan details.

Getting this stage right matters. A small mistake in the setup can affect tax calculations, payslips and HMRC submissions. Where payroll needs to feed into your wider accounts, our bookkeeping services can help keep everything joined up.

5. Put the right payroll process in place

Registering for PAYE is only the first part. You also need a payroll routine that works every pay period.

Your payroll process should cover:

• Calculating gross pay, overtime or variable hours where relevant.

• Applying the correct tax code.

• Calculating Income Tax and National Insurance deductions.

• Managing pension deductions where applicable.

• Producing payslips for employees.

• Keeping records of pay, deductions and submissions.

If this sounds like a lot for one new hire, that is because payroll is a compliance process, not just an admin task. It needs consistency every time you run it.

6. Run payroll and submit RTI to HMRC

When you pay your employee, you normally need to submit payroll information to HMRC using Real Time Information, often called RTI. In many cases, that means sending a Full Payment Submission on or before the date the employee is paid.

This is one of the areas where first-time employers often make mistakes. Common issues include using the wrong pay date, missing the filing deadline or submitting data that does not match the payslip.

If you want to reduce the risk of errors from day one, our outsourced payroll services can manage payroll processing, submissions and payslips on your behalf.

7. Pay HMRC and keep your records up to date

After payroll has been processed, you must also pay any PAYE liabilities to HMRC by the relevant deadline. You should then keep clear payroll records, reconcile your figures and make sure employee information stays current.

Ongoing payroll administration may include:

• Processing starters and leavers.

• Updating tax codes.

• Handling statutory payments where applicable.

• Managing pension deductions and communications.

• Correcting any submission errors promptly.

In other words, PAYE registration gets you started, but good payroll administration keeps you compliant.

What first-time employers often forget

When businesses focus only on how to register for PAYE, they can miss the wider responsibilities that sit alongside payroll. The most common overlooked areas include:

Auto-enrolment pensions

Depending on your workforce and earnings, workplace pension duties may apply. Even where someone is not automatically enrolled, you may still need to assess them and keep records.

Starter documentation

If a new employee does not provide a P45, you may need to use a starter checklist so the correct tax treatment can be applied.

Holiday and statutory pay

Payroll is closely connected to holiday pay, sick pay and other statutory payments. These need to be handled correctly when they arise.

Accurate records

Payroll records are not just useful for your business. They are part of your compliance trail. Inaccurate or incomplete records can create problems if you need to answer HMRC queries later.

Common PAYE and payroll mistakes first-time employers make

Most payroll problems start with rushed setup rather than bad intentions. Here are some of the issues we see most often:

• Leaving registration too late and not having PAYE references before payroll is due.

• Using incomplete employee data, which can lead to tax code and submission errors.

• Missing RTI deadlines because payroll is treated as an afterthought.

• Forgetting pension duties while focusing only on tax and National Insurance.

• Assuming one employee means simple payroll, when directors, variable pay or statutory entitlements can quickly add complexity.

These mistakes are avoidable, but they do take time, attention and up-to-date knowledge.

Should you run payroll yourself or outsource it?

For some businesses, handling payroll in-house may be manageable at the start. If you have one straightforward employee, fixed monthly pay and reliable internal admin time, you may feel comfortable running it yourself.

However, many business owners quickly find that payroll is not the best use of their time. Outsourcing can make sense when you want:

• PAYE registration handled correctly from the outset.

• Accurate payslips and calculations every pay period.

• On-time HMRC submissions.

• Support with pensions, statutory pay and payroll queries.

• A smoother link between payroll, bookkeeping and accounts.

At Ideal Accountancy Ltd, we provide PAYE registration support as well as fully managed payroll services, so you can choose the level of help that suits your business.

Why businesses choose Ideal Accountancy Ltd for PAYE and payroll support

We are a cloud accounting and bookkeeping firm based in Swindon, supporting small and medium-sized businesses with tax, payroll, bookkeeping and business advice. We are an HMRC Registered Agent, licensed by the Association of Accounting Technicians, and accredited with QuickBooks, Sage and Xero.

That combination is especially useful for first-time employers. We can help you register for PAYE, set up payroll correctly and keep the process aligned with your wider accounts as your business grows.

Whether you want help with the initial registration, a fully managed payroll bureau, or ongoing support as you take on more staff, we tailor our service to your business rather than forcing you into a one-size-fits-all process.

Frequently asked questions

How long does it take to register for PAYE?

HMRC processing times can vary, so it is best to register well before your first payday. Leaving it until the last minute can delay your setup and create avoidable compliance pressure.

Can I register for PAYE on the day I pay my first employee?

That is not advisable. You should register before the first payday and allow time for your PAYE references and payroll setup to be completed properly.

What do I need to set up payroll for one employee?

You will usually need your business details, HMRC employer references, payroll software, the employee's personal and tax information, a pay schedule and a process for HMRC reporting.

Do I need payroll software if I only employ one person?

In practice, most employers benefit from payroll software or professional payroll support, even with one employee. The number of employees may be small, but the reporting and compliance duties still apply.

Should I outsource payroll as a small business?

Outsourcing is often worthwhile if you want to save time, reduce the risk of mistakes and make sure submissions, payslips and deductions are handled properly from the beginning.

Conclusion

Learning how to register for PAYE is only the first step. The bigger goal is building a payroll process that is accurate, compliant and easy to manage every pay period. Getting the setup right from the start can save you time, stress and rework later.

If you are taking on your first employee and want practical support, speak to Ideal Accountancy Ltd about PAYE registration and outsourced payroll support for your business.

Speak to Ideal Accountancy Ltd

We offer a free initial consultation and support businesses in Swindon and beyond with PAYE registration, payroll setup and ongoing payroll administration.

Call 01793 285098, email info@idealaccountancy.co.uk, or visit Ideal Accountancy Ltd to get started.