How to run payroll for one employee (2026/27): step by step, costs and deadlines

The short version: seven steps

• Register as an employer with HMRC (online, up to 2 months before the first payday; the PAYE reference can take up to 5 working days)¹.
• Check the employee's right to work in the UK and give them a written statement of employment particulars on or before day one.
• Collect their P45, or a starter checklist if they do not have one, so payroll can set the right tax code.
• Choose payroll software: HMRC's free Basic PAYE Tools is enough for fewer than 10 employees².
• Each payday: run the payroll, give a payslip, and send a Full Payment Submission (FPS) to HMRC on or before the payment date².
• Pay HMRC the tax and NI by the 22nd of the next tax month if paying electronically, or quarterly if your bill averages under £1,500 a month³.
• Set up a workplace pension for auto-enrolment and declare compliance to The Pensions Regulator within 5 months of the employee's start date⁵.

What one employee actually costs, and what you pay HMRC

Employer NI for 2026/27 is 15% on pay above £5,000 a year, and the minimum employer pension is 3% of qualifying earnings between £6,240 and £50,270. The table shows the yearly employer cost and the amount you send to HMRC each month, with and without Employment Allowance.

Salary	Employer NI	Employer pension	Total yearly cost	Paid to HMRC monthly (with Employment Allowance)	Paid to HMRC monthly (no allowance)
£24,784.50	£2,967.67	£556.33	£28,308.50	£285.00	£532.31
£30,000	£3,750.00	£712.80	£34,462.80	£406.70	£719.20
£40,000	£5,250.00	£1,012.80	£46,262.80	£640.03	£1,077.53

£24,784.50 is the National Living Wage (£12.71) at 37.5 hours a week. HMRC payment = employee income tax + employee NI (+ employer NI where no allowance applies). Pension contributions go to the pension provider, not HMRC. Total yearly cost excludes Employment Allowance.

With Employment Allowance a single employee on £30,000 costs you £30,712.80 a year in pay and pension, and the HMRC payment is only the tax and NI you have deducted from their wages: £406.70 a month. All three examples are under £1,500 a month, so you can ask HMRC to pay quarterly instead of monthly³.

Employment Allowance with one employee

Employment Allowance takes up to £10,500 a year off your employer NI bill⁴, which covers one employee's employer NI on any salary up to £75,000. A sole trader or partnership with one employee can claim it, as can a company whose one employee is not a director.

The exception catches many small companies: if the only person paid above £5,000 is a director, the company cannot claim⁴. A director-only company paying its director £12,570 therefore pays £1,135.50 of employer NI with no allowance to offset it. You claim the allowance through your payroll software on an Employer Payment Summary (EPS), usually with the first payroll of the tax year.

Monthly payroll routine for a single employee

Once set up, payroll for one person takes about 15 minutes a month. Enter the hours or salary for the period, add any overtime, sick pay or holiday adjustments, and let the software work out income tax (using the tax code), employee and employer NI, pension and any student loan.

Send the FPS before you pay. Then pay the employee, give them their payslip, and pay the pension contributions to the provider by the 22nd of the following month. Check what you owe in your HMRC business tax account and pay it by the 22nd of the next tax month (electronic payment), unless you are on quarterly payments.

• If nobody is paid in a month, send an EPS instead of an FPS so HMRC does not estimate a bill.
• If the employee starts or leaves part-way through a month, pay them for the days worked: see the part-month salary calculator.
• Statutory sick pay is paid from the first day of sickness from April 2026 and goes through payroll like normal pay.
• At the end of the tax year, mark the last FPS as the final one (or send a final EPS by 19 April) and give the employee a P60 by 31 May².
• When the employee leaves, give them a P45 and include their leaving date on the next FPS.

Free software or a paid package?

HMRC's Basic PAYE Tools is free and does the RTI submissions, but it does not produce payslips or handle auto-enrolment, so you will need a separate payslip template and pension provider portal. Paid packages (from a few pounds a month for one employee) do the payslips, pension uploads and holiday tracking in one place. Many pension providers, including NEST, accept contribution files from either.

Before choosing, decide whether you or an accountant will run it. If your accountant already does your year-end, adding one payroll employee is often cheaper than you expect.

Mistakes first-time employers make

• Paying the first wages before registering as an employer, then filing late.
• Forgetting employers' liability insurance: required by law with at least £5 million of cover once you employ someone, with limited exceptions for close family members of an unincorporated business.
• Assuming a single director can claim Employment Allowance.
• Missing the auto-enrolment declaration of compliance, even when the employee is not eligible to be enrolled.
• Paying a part-time or hourly employee below the minimum wage for the hours actually worked in the pay period.
• Not keeping payroll records for 3 years after the end of the tax year they relate to.