James Holloway
Why you can't delay registering for PAYE
As soon as you take on an employee, you become an employer in the eyes of HMRC. That means new responsibilities, and one of the first is registering for PAYE (Pay As You Earn). Many small business owners assume they can wait until the end of the tax year or until the employee has settled in. But that's a costly mistake. You must register before your first payday. If you don't, you risk penalties and you won't be able to report your employee's pay and deductions correctly. PAYE isn't just about income tax; it also covers National Insurance contributions, student loan repayments, and pension contributions. Getting registered early ensures you can run payroll smoothly from day one.
The golden rule: register before the first payday
The rule is simple and strict. You must register as an employer with HMRC before you pay anyone for the first time. This applies even if the employee is part-time, temporary, or a casual worker. It also applies if they only work a few hours a week. The moment you agree to pay someone for their work, you need to be ready to operate PAYE. You can register up to two months before your first payday, which gives you time to set up your payroll. But don't leave it until the day before. Registration can take a few days to process, and you'll need your employer PAYE reference before you can file your first Real Time Information (RTI) submission on or before payday.
Part-time, temporary and casual workers: no exceptions
A common misunderstanding is that you only need to register if you hire someone full-time or on a permanent contract. That's not true. HMRC requires you to register for PAYE if you employ anyone, regardless of their hours or contract type. This includes:
- Part-time staff who work a few hours a week
- Temporary workers covering busy periods or holidays
- Casual workers you call in as needed
- Students or family members you pay for helping out
There are very limited exceptions, such as paying someone below the Lower Earnings Limit who has no other job, but even then you must keep records. If in doubt, register. It's better to be safe than sorry.
What you need to register (and what happens next)
Registering for PAYE is straightforward if you have the right information. You'll need your business details, including your Unique Taxpayer Reference (UTR) if you're a sole trader or limited company, and your business bank account details. You'll also need to provide information about your employee, such as their name, address, date of birth, and National Insurance number. Once registered, HMRC will send you an employer PAYE reference. You'll use this to file payroll reports and pay what you owe. You'll also need to set up a payroll system, either manual or using software. Remember, you must report to HMRC on or before each payday using RTI. That means sending details of pay, tax, and National Insurance for each employee.
Ongoing responsibilities and common pitfalls
Once you're registered, your responsibilities don't stop. You must:
- Calculate and deduct the right amount of tax and National Insurance
- Pay HMRC by the 22nd of the following month (or 19th if by post)
- Provide payslips to your employees
- Report to HMRC in real time on or before each payday
- Keep accurate records for at least 3 years
Common pitfalls include missing the registration deadline, forgetting to report a new employee, or using the wrong tax code. These can lead to penalties and interest. If you're unsure, seek advice from an accountant. A good accountant can help you register, set up payroll, and stay compliant. Don't wait until you've paid someone to think about PAYE. Register early, stay organised, and you'll keep your business on the right side of HMRC.
