How do you run payroll in the UK?

Running payroll isn’t just about getting people paid. In 2026, it’s also about staying aligned with HMRC rules, keeping accurate payroll data across the tax year, and sending the right RTI information at the right time.

If you’re setting up payroll for the first time, or tightening things up as you grow, this guide walks through the essentials: what payroll involves in practice, the steps employers need to follow, and where mistakes (and penalties) usually happen.

What does “running payroll” actually mean?

In simple terms, payroll is the routine employers follow to calculate what employees are owed for a given period, apply PAYE tax and NI, and send the required information to HMRC under RTI.

That usually includes:

• maintaining up-to-date employee details (including tax codes)

• calculating gross earnings and statutory payments where relevant

• applying tax, NI and other withholdings (where applicable)

• generating payslips and maintaining payroll records

• sending RTI submissions to HMRC (e.g., FPS, and sometimes an Employer Payment Summary)

HMRC’s core guidance for payroll tasks and responsibilities sits under PAYE and RTI. 

What do you need to do before the first payday?

Before you can pay employees through PAYE, HMRC expects employers to get a few basics in place.

Register as an employer (PAYE)

Most businesses that employ staff must register with HMRC and set up PAYE before the first payday. 

Choose how you’ll manage payroll

You generally have three routes:

1. In-house (spreadsheets + manual RTI submissions)

2. Payroll software (cloud or desktop)

3. Outsourced payroll provider (bureau/accountant)

💡 Good to know: If you choose payroll software, make sure it's on the HMRC-recognised list. PayFit UK is included on that list, which means it's been validated by HMRC for RTI reporting.

Collect the right employee information

At minimum: name, address, start date, NI number (if available), and the info needed to apply the correct tax code (starter checklist/P45 route). HMRC highlights the importance of correct employee details for accurate PAYE handling. 

What are the key steps to run payroll each period?

Think of payroll as a repeatable workflow. The exact steps vary by business, but the pattern is stable.

1) Confirm hours, salary changes, and absences

You’ll need an agreed cut-off date to capture changes (overtime, bonuses, unpaid leave, statutory leave, starters/leavers).

2) Calculate gross earnings and statutory amounts

Gross earnings are the starting point for PAYE and NI calculations. If statutory payments apply (e.g., SMP), they must be handled in line with HMRC rules.

3) Apply PAYE tax and National Insurance (and other withholdings)

This is where accuracy matters most. Small data errors can cascade into incorrect tax/NI and messy end-of-year clean-up.

HMRC’s employer guidance explains how tax and NI are tied to payroll calculations and reporting. 

4) Issue payslips and confirm payment amounts

Employees must receive a payslip on or before payday (digital is fine). Keep the format consistent and easy to understand.

5) Send RTI submissions to HMRC (FPS, and sometimes EPS)

Under RTI, most employers must submit an FPS on or before they pay employees. 

If you need to reclaim statutory payments or report things not included in the FPS, an Employer Payment Summary may be relevant (case-dependent).

6) Pay HMRC on time

PAYE and NI owed to HMRC typically follow monthly deadlines, commonly the 19th (if paying by post) or the 22nd (if paying electronically).  

Payroll timeline at a glance

What mistakes cause late submissions and penalties?

Most payroll problems aren’t “big” mistake, they’re small, repeated ones:

• missing the RTI timing rule (submitting after payday)

• inconsistent cut-off dates (changes arriving too late to be included cleanly)

• employee records not updated (tax code changes, NI numbers, leavers)

• unclear ownership (who approves, who submits, who checks)

• relying on manual workarounds as headcount grows

An HMRC compliance checklist helps prevent these recurring errors by providing a structured approach to reporting deadlines and submission requirements.

How can payroll software support businesses running payroll?

Payroll administration often grows quietly in the background: new joiners, changing salaries, evolving rules, and recurring deadlines all add up.

A payroll software supports businesses by bringing payroll management into a single, structured workflow. Instead of juggling multiple tools or manual steps, employers can manage employee changes, salary calculations, and payroll outputs in one place.

Running payroll with payroll software

With an automated payroll software, businesses can:

• Keep employee information consistent across payroll cycles

• Reduce manual checks and last-minute adjustments

• Maintain clearer visibility over monthly payroll tasks

• Adapt more easily as payroll rules evolve over time

This approach helps payroll feel more predictable and less reactive, especially as organisations grow.

Day-to-day management with payroll software

Modern payroll software is designed to reduce friction rather than add complexity.

Instead of relying on spreadsheets or disconnected tools, businesses can manage employee information, salary changes, and payroll outputs in one place. This helps teams spot issues earlier and avoid repeated manual checks.

For many employers, the biggest benefit is clarity: knowing where information lives, who is responsible for each step, and what still needs attention before deadlines.

Want to experience the future of payroll?

Book a demo