Register PAYE scheme: steps, timing and login

How to register a new PAYE scheme?

A new PAYE scheme is set up by registering as an employer with HM Revenue and Customs (HMRC), which gives the business an employer PAYE reference number sent in a letter. Registration must happen before the first payday to get that reference number. Most limited companies with 1 to 9 directors can register online, and an application already started can be continued. ^[1]

Once registered, PAYE can be operated either by paying a provider of outsourced payroll services or in-house using payroll software. Other types of business have their own GOV.UK guidance on how to register.

When to set up a PAYE scheme?

Registration is normally needed when a business starts employing staff, or using subcontractors for construction work. It is needed even where the only person employed is the owner, for example as the only director of a limited company.

Registration for PAYE is required if any of the following applies to an employee in the current tax year (since 6 April):

• they are paid £96 or more a week
• they get expenses and company benefits
• they are getting a pension
• they have had another job
• they have received Jobseeker's Allowance, Employment and Support Allowance or Incapacity Benefit

If none of these applies, payroll records still need to be kept. ^[2]

These are payroll matters. For VAT, the guide to input VAT and output VAT and the guide to cash accounting for VAT cover how VAT is handled.

How long does it take to register a PAYE scheme?

No fixed processing time is set out for registration. The employer PAYE reference number arrives by letter, and after registering it is possible to check when to expect that letter from HMRC.

Registration cannot be made more than 2 months before the business starts paying people, and it must be made before the first payday. Planning the registration inside that window may help the reference number arrive in time for the first pay run.

If an employee has to be paid before the reference number arrives, the steps are to run payroll, store the full payment submission and send a late full payment submission to HMRC.

The extracts give no fixed processing time, but they say the employer PAYE reference number is sent in a letter and that it is possible to check when to expect that letter from HMRC after registering.

The extracts give no fixed time for registration to be processed, but the employer PAYE reference number is sent in a letter, and after registering it is possible to check when to expect that letter from HMRC.

How to activate PAYE online?

For an employer running payroll itself, the first set-up task is to register as an employer with HMRC and get a login for PAYE Online.

A business tax account can be used once a business has registered for a business tax online, and PAYE for employers is one of the services it covers. ^[3] From the account, a business can check its tax position for taxes it has registered for, make returns and payments, add or remove a tax, duty or scheme, and add, view or change a tax agent. Signing in needs the sign in details used when a business tax was first registered.

The 13-character accounts office reference number used to pay HMRC can be found in the online account once enrolled for PAYE online, and on the letter HMRC sent at registration. ^[4]

From registration to the first payday

Running payroll in-house after registering involves choosing payroll software, collecting and keeping records, telling HMRC about employees, recording pay, making deductions and reporting to HMRC on or before the first payday, then paying HMRC the tax and National Insurance owed. After that, an employer running payroll itself reports employees' payments and deductions to HMRC on or before each payday.

Payment to HMRC is usually monthly, and a small employer that expects to pay less than £1,500 a month can arrange to pay quarterly by contacting HMRC's payment enquiry helpline. A monthly PAYE bill is due by the 22nd of the next tax month, and a cheque sent through the post must reach HMRC by the 19th of the month. ^[4]

Running payroll yourself or using a provider

An employer paying a payroll provider, such as a bureau or accountant, needs to consider how much support it needs. Some providers can offer more, for example keeping employee records, providing payslips and making payments to HMRC. The employer is legally responsible for completing all PAYE tasks, even if it pays someone else to do them.

Records of pay and deductions, reports and payments to HMRC, leave and sickness absences, tax code notices and taxable expenses or benefits are kept either way. They need to show accurate reporting and are kept for 3 years from the end of the tax year they relate to, with different rules for records proving the minimum wage, statutory leave and holiday pay.