1. What Is a PAYE Employer?
A PAYE employer is a business or individual that uses the Pay As You Earn (PAYE) system to collect Income Tax and National Insurance contributions (NICs) from employees’ wages and pay them to HMRC.
2. When Do You Need to Register as a PAYE Employer?
You must register as a PAYE employer if you:
- Pay any employee £123 or more per week (2025 threshold).
- Provide employees with benefits or expenses.
- Have staff earning above the NICs threshold.
- Deduct student loan repayments or pension contributions.
Even if employees earn below the threshold, you may still need to register if other deductions apply.
3. How to Register as a PAYE Employer
- Register with HMRC as an employer (online or by post).
- Set up a payroll system (HMRC Basic PAYE Tools or payroll software).
- Receive your PAYE reference number from HMRC.
- Start reporting employee pay and deductions in real time (RTI).
4. PAYE Employer Responsibilities
- Calculate and deduct Income Tax from wages.
- Deduct National Insurance contributions (NICs).
- Collect student loan repayments if required.
- Process workplace pension contributions.
- Provide employees with payslips.
- Submit Real Time Information (RTI) reports to HMRC.
- Pay all deductions to HMRC by the deadline.
5. PAYE Deadlines
- Monthly payments: By the 22nd of the month (if paying electronically).
- Quarterly payments: For small employers with under £1,500 monthly liability.
- Year-end: Provide employees with P60s by 31 May and submit final reports to HMRC.
6. PAYE Employer Forms and Documents
- P45: Given to employees when they leave.
- P60: Annual summary of pay and deductions.
- P11D: Declares employee benefits and expenses.
- RTI submissions: Sent every payday to HMRC.
7. Benefits of PAYE for Employers and Employees
- Ensures employees’ tax and NICs are paid on time.
- Reduces risk of underpayment or penalties.
- Provides accurate records for mortgages and loans.
- Employees don’t need to calculate their own tax.
8. Penalties for Non-Compliance
- Late filing penalties (from £100 upwards).
- Interest on unpaid PAYE liabilities.
- Possible HMRC investigation.
- Risk of damaging business reputation.
9. Tools to Help PAYE Employers
- HMRC Basic PAYE Tools (free for small businesses).
- Accounting and payroll software (Xero, QuickBooks, Sage).
- Outsourced payroll providers for compliance and time savings.
Frequently Asked Questions
1. What does PAYE employer mean?
It means a business that deducts tax and NICs from employees’ wages and pays them to HMRC.
2. Do self-employed people use PAYE?
No, self-employed individuals pay tax via Self-Assessment, not PAYE.
3. How do I know if I need to register as a PAYE employer?
If you have employees earning above £123 a week or with deductions such as NICs, student loans, or pensions.
4. Can I run PAYE myself?
Yes, using HMRC tools or payroll software, but many employers use accountants.
5. How often do PAYE employers pay HMRC?
Most pay monthly, but some small employers can pay quarterly.
6. What happens if I miss a PAYE deadline?
You’ll face fines, interest charges, and possible HMRC enforcement action.
Conclusion
Being a PAYE employer means handling tax and NICs deductions correctly, submitting payroll reports, and paying HMRC on time. With the right systems in place, PAYE is straightforward and ensures compliance while keeping employees’ pay accurate and transparent.