How Can PAYE Registration Services Help Startups Stay Compliant?
What happens when a startup hires its first employee or pays a director a salary? When is the right time to register for PAYE, and what are the risks of getting it wrong? For many new businesses, payroll and tax responsibilities can seem like a maze of unfamiliar rules and deadlines.
PAYE (Pay As You Earn) is one of the core systems that employers in the UK must understand and manage accurately from the outset. Failure to comply can lead to serious consequences, including penalties, delayed employee benefits, and unnecessary administrative burdens.
So how can PAYE registration services support startups in staying compliant with HMRC regulations? This article explores everything startups need to know, from who needs PAYE registration and what it covers to the consequences of getting it wrong and the benefits of outsourcing to a professional provider.
What Is PAYE and Why Must Startups Register?
PAYE is HMRC’s method of collecting Income Tax and National Insurance Contributions (NICs) from employees’ earnings. As soon as a business begins employing staff or paying directors beyond a certain threshold, it is legally obligated to register as an employer and set up a PAYE scheme.
Registration becomes mandatory in the following circumstances:
- The business pays at least one employee or company director £96 or more per week, which equates to £417 per month or £5,000 annually
- It employs someone who already has another job or receives a pension
- It offers any benefits or reimbursable expenses to employees or directors
- It hires subcontractors, particularly in the construction industry
However, even if a startup is not required to operate PAYE, it still has obligations. These include maintaining accurate payroll records, issuing payslips, and complying with employment law.
Understanding when PAYE applies and initiating the registration process at the right time is a vital part of startup compliance.
What Payments and Deductions Must Be Reported Through PAYE?
PAYE covers a wide range of earnings and employer responsibilities. Through this system, employers must process several types of payments and make associated deductions.
Common earnings processed under PAYE include:
- Basic wages or salaries
- Bonuses and commissions
- Statutory Sick Pay (SSP)
- Statutory Maternity, Paternity, and Adoption Pay
- Redundancy pay
- Pensions
- Certain reimbursable expenses
- Tips, excluding cash tips
These payments are subject to multiple deductions, including Income Tax, employee Class 1 NICs, pension contributions, student and postgraduate loan repayments, and in some cases, child maintenance and employer-issued loan repayments.
Employers also bear the responsibility of paying their own contributions. The employer NIC rate rose from 13.8% to 15% on 6 April 2025, and the NIC Secondary Threshold was reduced from £9,100 to £5,000 per year. This makes accurate payroll processing more critical than ever.
How Does a Startup Register for PAYE with HMRC?
Registering for PAYE requires careful timing and precision. Startups must complete this process before their first payday, but they cannot register more than two months in advance. Because HMRC may take up to two weeks to process an application, early planning is essential.
Step-by-Step Guide to PAYE Registration
The registration process typically unfolds in several steps:
| Step | Action |
| 1 | Visit HMRC’s registration page and confirm online eligibility |
| 2 | Create or log into your Government Gateway account |
| 3 | Add the “PAYE for Employers” service to your business tax account |
| 4 | Complete the registration form with details such as first payday, company name, director NI numbers, and expected number of employees |
| 5 | Submit the application and await your employer PAYE and Accounts Office references |
| 6 | Use the activation code sent by HMRC to access your PAYE Online service |
After registration is complete, employers can access tax notices, view liabilities, manage payments, and submit payroll data to HMRC.
Some companies may not be eligible to register online and will need to complete the process by phone. This includes businesses with more than 10 directors, offshore employers, and those lacking a director with a UK National Insurance number.
What Are the Employer’s Responsibilities After PAYE Registration?
Registering for PAYE is just the beginning. Once active, the employer must carry out multiple tasks on or before each payday.
Each payroll cycle includes the following responsibilities:
- Recording employee pay, including wages and any bonuses or reimbursements
- Calculating deductions, including tax, employee NICs, and any pension or loan repayments
- Calculating employer NIC contributions
- Creating and issuing payslips to all employees, including directors
- Submitting a Full Payment Submission (FPS) to HMRC via RTI-compatible payroll software
If a business does not pay any employees in a particular tax month, it must submit an Employer Payment Summary (EPS) instead of an FPS.
The PAYE system is integrated into the Real Time Information (RTI) framework, meaning that all submissions must be made on or before the date employees are paid.
What Happens After Each Payday?
After each payday, employers have additional obligations related to PAYE reporting and payments. From the 12th of each month, businesses can view the amount they owe in their PAYE Online account.
If they need to claim any reductions, such as statutory payments, an EPS must be submitted by the 19th of the month. PAYE bills must then be paid by the 22nd (or the 19th if paying by post) to avoid penalties.
In some cases, HMRC allows quarterly payments instead of monthly, particularly for businesses whose monthly PAYE liability is less than £1,500.
What Are the Penalties for Late or Incorrect PAYE Reporting?
Timeliness is critical in PAYE reporting. Failure to submit accurate and timely reports can lead to:
- Financial penalties
- Closure of the PAYE scheme (if inactive for over 120 days)
- Delays in employees accessing income-based benefits like Universal Credit or Employment and Support Allowance (ESA)
However, HMRC may not impose penalties in some instances, such as:
- The first submission is within 30 days for a new employer
- The FPS is late but still within 3 days of payday (if not habitual)
- It’s the first offence in the tax year
Employers must provide a valid reason for any late FPS submission, such as delays due to banking holidays or employee onboarding issues. These reasons must be declared using the appropriate code in the FPS report. Failure to provide a valid explanation may result in penalties.
What Is the Role of PAYE in Pension Contributions?
If a business employs anyone other than the sole director, it is usually legally required to operate a workplace pension scheme under the auto-enrolment rules. This means automatically enrolling eligible staff and processing pension contributions via PAYE.
An employee qualifies for automatic enrolment if they:
- Are aged between 22 and State Pension age
- Earn £10,000 or more per year
- Usually work in the UK
Employers must contribute a minimum amount to each employee’s pension scheme, ensure timely payments, and accommodate opt-outs and re-enrolments. These contributions are usually processed through the PAYE system, making accurate payroll setup crucial for pension compliance.
How Do Professional PAYE Services Support Startup Compliance?
Startups are typically resource-constrained, with founders juggling multiple responsibilities. Managing PAYE manually requires both technical knowledge and time, something many new businesses can’t afford.
Professional PAYE registration services step in to simplify this burden. They offer guidance from registration to ongoing payroll and RTI submissions, ensuring all reporting deadlines are met and deductions are accurate.
By outsourcing this task, startups reduce their risk of non-compliance, avoid penalties, and free up internal resources for core business development.
One such provider, TunedIn Payroll, specialises in helping UK startups and SMEs with efficient, compliant payroll services tailored to meet evolving HMRC requirements.
What Should Startups Consider When Choosing a PAYE Service?
Not all PAYE registration services are created equal. Startups should select a provider that:
- Understands HMRC compliance standards and UK payroll legislation
- Offers RTI-compatible payroll software and support
- Provides setup for pensions and other statutory obligations
- Can assist with appeals and explanations for late reporting
- Has transparent pricing and UK-based client support
Choosing a knowledgeable provider from the outset can save both time and money in the long run.
Why Should Startups Prioritise PAYE Compliance From Day One?
Compliance with PAYE regulations is not just a legal formality, it’s a key part of being a responsible employer. Ensuring that employees are paid correctly, on time, and with accurate deductions enhances trust, improves morale, and keeps your business clear of regulatory trouble.
Startups that use professional PAYE services benefit from peace of mind, operational efficiency, and the ability to focus on growing their business without getting bogged down in tax complexities.
Frequently Asked Questions
What is the earliest I can register for PAYE?
You can register no more than two months before your first payday.
What is a PAYE reference number?
It is a unique identifier issued by HMRC to manage your PAYE liabilities and submissions.
Is it mandatory to report every employee through PAYE?
Yes, including employees who earn less than £96 per week.
Can I process dividends through PAYE?
No, dividends are not handled through PAYE. They are reported via Self Assessment.
Do I need PAYE if I only have directors?
Yes, if any director earns over the weekly threshold or receives benefits.
What if I miss my first submission?
HMRC may not issue a penalty if the first submission is within 30 days, especially for new employers.
How do I manage pension contributions?
You must automatically enrol eligible employees and process contributions via payroll on time.
