UK PAYE + RTI for New Employers (2026/27): Setup Guide
Setting up PAYE in 2026/27: registering before the first payday, FPS and EPS deadlines, starter tax codes, auto-enrolment, Employment Allowance and penalties.
What a first-time employer has to do to run PAYE in 2026/27: register with HMRC before the first payday, send Real Time Information reports, choose the right starter tax code, meet auto-enrolment duties and pay HMRC on time. Employer NI is 15% above the secondary threshold of £5,000 a year, and Employment Allowance can offset up to £10,500 of it.
New-employer setup in 7 steps
| Step | Timing | Detail |
|---|---|---|
| 1. Register as employer | Before first payday | Register with HMRC to get your employer PAYE reference, which comes by letter. You cannot register more than 2 months before you start paying people. A sole director paying only themselves must still register. |
| 2. Choose payroll software | Before first payday | Software must be able to send RTI reports. HMRC's free Basic PAYE Tools is for businesses with fewer than 10 employees; other commercial software is available. |
| 3. Set up a workplace pension | From your duties start date | Choose a qualifying scheme and enrol eligible staff. Declare compliance to The Pensions Regulator within 5 months of your duties start date. |
| 4. Collect new starter information | Before first payday | Use the P45 from the previous employer, or the Starter Checklist if there is none, to work out the tax code. Check the right to work in the UK before employment starts. |
| 5. Run payroll and send the FPS | On or before payday | Send a Full Payment Submission for everyone you pay, on or before the day you pay them. |
| 6. Send an EPS if needed | By the 19th of the next tax month | An Employer Payment Summary claims reductions such as statutory pay recovery or Employment Allowance, or tells HMRC you paid no one. |
| 7. Pay HMRC | By the 22nd of the next tax month | Income Tax, employee and employer NI, student loan deductions and any Apprenticeship Levy. 19th if paying by cheque through the post. |
Right to work: the Home Office can charge a civil penalty of up to £60,000 for each illegal worker if you did not do the correct checks (gov.uk).
Real Time Information (RTI)
FPS - Full Payment Submission
Sent on or before each payday, using your usual payday even if you pay early. Include everyone you pay. Some late reporting is allowed, for example ad hoc payments or a payday on a non-banking day, with a late reporting reason on the FPS.
EPS - Employer Payment Summary
Sent by the 19th of the next tax month to claim reductions. Statutory maternity, paternity, adoption, shared parental, parental bereavement and neonatal care pay are usually 92% recoverable, or 109% under Small Employers' Relief for employers with £45,000 or less of Class 1 NI in the last complete tax year (gov.uk).
Common tax codes
| Code | Meaning | When it applies |
|---|---|---|
| 1257L | Standard / emergency code | The usual code for someone with one job or pension: the £12,570 Personal Allowance spread over the year. Also the emergency code. |
| 1257L W1 / M1 / X | Non-cumulative | The allowance is given week by week or month by month without looking back at earlier pay in the year. Used for Starter Checklist statement B. |
| BR | Basic rate | All income from this job or pension taxed at the basic rate. Used for Starter Checklist statement C (another job or a pension). |
| D0 / D1 | Higher / additional rate | All income from this source taxed at the higher (D0) or additional (D1) rate. Issued by HMRC for a second source of income. |
| 0T | No Personal Allowance | Personal Allowance used up, or the employer does not have the details needed to give a code. Normal bands apply. |
| NT | No tax | No tax deducted from this income. Only on HMRC's instruction. |
| K codes | Negative allowance | Deductions (for example benefits or untaxed income) exceed the allowance, so an amount is added to taxable pay instead. |
| S / C prefix | Scottish / Welsh rates | S means Scottish Income Tax rates apply; C means Welsh rates apply (for example S1257L, C0T). |
NI category letters also matter: A covers most employees, M is for employees under 21 and H for apprentices under 25 (gov.uk).
Auto-enrolment duties
Min total contribution
8%
Usually of qualifying earnings
Employer min
3%
Legal minimum
Employee
5%
Where the employer pays the minimum
Qualifying earnings in 2026/27: £6,240 to £50,270 a year. Enrol staff aged 22 to State Pension age earning at least £10,000. Staff who opt out within a month of being enrolled get their contributions back. See the workplace pension auto-enrolment guide.
PAYE deadlines
| Deadline | What is due |
|---|---|
| On or before each payday | FPS to HMRC |
| 19th of next tax month | EPS; payment if by cheque through the post |
| 22nd of next tax month | Electronic payment of PAYE, NI, student loans and levy |
| Last payday of the tax year | Final FPS marked as the final submission |
| 31 May | P60 to each employee |
| 6 July | P11D and P11D(b) to HMRC; copy of the information to employees |
| 22 July (19 July by cheque) | Class 1A NI on benefits |
Late FPS penalties (per month)
| Employees | Monthly penalty |
|---|---|
| 1 to 9 | £100 |
| 10 to 49 | £200 |
| 50 to 249 | £300 |
| 250 or more | £400 |
Source: gov.uk. Late payment penalties run from 1% to 4% of the amount late depending on the number of defaults in the year (gov.uk).
Related calculators and guides
- Employer cost calculator - total cost of employment per worker.
- UK NI rates - employee and employer rates and thresholds.
- Optimum director salary 2026/27 - salary level and Employment Allowance.
- Workplace pension auto-enrolment - contribution mechanics.
- 1257L tax code meaning - the standard tax code.
- SMP guide - statutory maternity pay and employer recovery.
- SSP guide - statutory sick pay.
- Apprenticeship Levy calculator - levy on pay bills above £3,000,000.
- NMW 2026/27 employer guide - £12.71/hr National Living Wage.
Frequently asked questions
When do I need to register as an employer?
Before the first payday. HMRC sends your employer PAYE reference by letter, and you cannot register more than 2 months before you start paying people. You must register even if the only person you employ is yourself, for example as the sole director of a limited company. If you pay someone before the reference arrives, run payroll, keep the FPS and send it late once you have the reference, using late reporting reason G.
What is RTI and what are the FPS and EPS?
Real Time Information means reporting payroll to HMRC each time you pay staff. The Full Payment Submission (FPS) goes on or before each payday and covers pay and deductions for everyone you pay. The Employer Payment Summary (EPS) goes by the 19th of the following tax month (tax months run from the 6th) to claim reductions such as statutory pay recovery or Employment Allowance, or to tell HMRC you paid no one that month.
What are the penalties for late FPS reports?
A monthly penalty that depends on how many employees you have: 1 to 9, £100; 10 to 49, £200; 50 to 249, £300; 250 or more, £400. HMRC does not charge if every payment on the late FPS is within 3 days of payday (though regular use of those 3 days can be penalised), if a new employer sends its first FPS within 30 days of first paying someone, or for the first failure in the tax year.
What happens if I pay HMRC late?
Late monthly or quarterly PAYE payments are penalised as a percentage of the amount late, rising with the number of defaults in the tax year: 1 to 3, 1%; 4 to 6, 2%; 7 to 9, 3%; 10 or more, 4%. The first late payment in the year does not count as a default. A further 5% applies to amounts still unpaid after 6 months and another 5% after 12 months, and interest runs on everything unpaid.
Which tax code do I use for a new starter without a P45?
Ask them to complete the Starter Checklist. Statement A (first job since 6 April, no taxable benefits or pension) uses the emergency code 1257L on a cumulative basis; statement B (now the only job, but had another job or certain benefits since 6 April) uses the emergency code on a week 1 or month 1 basis; statement C (has another job or a pension) uses BR (HMRC PAYE61030). HMRC then sends a coding notice if a different code is needed.
What are my auto-enrolment duties?
You must enrol, and contribute for, staff aged between 22 and State Pension age who earn at least £10,000 a year and normally work in the UK. Minimum contributions are 3% from the employer and 8% in total, usually on earnings between £6,240 and £50,270. Staff who earn less can ask to join; the employer must contribute for those earning more than £6,240 a year. You must declare compliance to The Pensions Regulator within 5 months of your duties start date and re-enrol staff who opted out every 3 years.
What is the Employment Allowance?
Employment Allowance cuts an eligible employer's Class 1 employer NI by up to £10,500 a tax year. Since April 2025 employers with more than £100,000 of Class 1 NI liabilities can also claim. A company whose only director is the only employee liable for employer NI cannot claim, and you must do less than half your work in the public sector. Example: with employer NI of £6,000 the allowance covers it all; with £15,000 you pay £4,500.
How does the Apprenticeship Levy work?
The levy is 0.5% of your annual pay bill, less an allowance of £15,000 a year, so only employers (including connected companies) with a pay bill above £3,000,000 pay anything. Examples: on a pay bill of £4,000,000, £20,000 less the allowance leaves £5,000 due; on a pay bill of £5,000,000, £25,000 less the allowance leaves £10,000 due; on a pay bill of £8,000,000, £40,000 less the allowance leaves £25,000 due. It is reported and paid monthly through the EPS.
What do I need to do when an employee leaves?
Put the leaving date on their payroll record when you last pay them and send it in your next FPS, deducting tax and NI as normal. Give the employee a P45. If you pay them again after giving the P45, use code 0T on a week 1 or month 1 basis (S0T or C0T for Scottish or Welsh taxpayers) and set the payment after leaving indicator on the FPS.
What are the year-end deadlines?
Send your final FPS on or before the last payday of the tax year, marked as the final submission (or an EPS if you could not mark it). Give each employee a P60 by 31 May. Report expenses and benefits on P11D, and Class 1A NI on P11D(b), by 6 July, and pay Class 1A by 22 July (19 July by cheque). A late P11D(b) costs £100 per 50 employees for each month or part month.
How long must I keep payroll records?
For 3 years from the end of the tax year they relate to. That covers pay and deductions, reports and payments to HMRC, leave and sickness absences, tax code notices and taxable expenses or benefits. If you do not keep full records HMRC may estimate what you owe and charge a penalty of up to £3,000.