Payroll Setup Checklist for New Employers in London
Hiring your first employee is an exciting milestone for any business. But with that excitement comes responsibility—especially when it comes to payroll. Setting up payroll correctly ensures your staff are paid accurately, you stay compliant with HMRC rules, and you avoid costly penalties.
If you’re a new employer in London, this checklist will walk you through everything you need to set up payroll smoothly and stress-free.
Step 1: Register as an Employer with HMRC
Before paying staff, you must register your business as an employer with HMRC.
- Do this before the first payday.
- HMRC will provide a PAYE reference number.
- This allows you to calculate Income Tax and National Insurance contributions.
Step 2: Choose a Payroll System
You have two options:
- Manual Payroll Software (time-consuming, risky for errors).
- Cloud Payroll Software such as Xero or QuickBooks.
Most London SMEs choose cloud-based payroll for efficiency and compliance. (Internal link opportunity: link to your Payroll Services London page.)
Step 3: Collect Employee Information
For each employee, you’ll need:
- Full name and address
- National Insurance number
- P45 (if they’ve worked before)
- Starter checklist (if no P45 is available)
This ensures you deduct the correct tax and NI contributions.
Step 4: Run Payroll & Calculate Deductions
When running payroll, make sure to:
- Calculate gross pay (salary, overtime, bonuses).
- Deduct Income Tax and National Insurance.
- Add any statutory pay (sick pay, maternity/paternity pay).
- Process auto-enrolment pension contributions.
Step 5: Submit Real-Time Information (RTI) to HMRC
Every time you pay staff, you must send an RTI submission to HMRC. This includes:
- Payroll details
- Deductions
- Employer contributions
Missing RTI deadlines can result in fines.
Step 6: Issue Payslips
Employees are legally entitled to a payslip each payday. This can be digital or paper but must include:
- Gross and net pay
- Deductions (tax, NI, pensions)
- Pay date
Step 7: Keep Payroll Records
HMRC requires you to keep payroll records for at least 3 years. Records should include employee details, payments, and RTI submissions.
Step 8: Stay Updated on Payroll Legislation
Payroll rules change often, especially regarding tax thresholds and pensions. Staying compliant means keeping up to date with HMRC announcements—or outsourcing payroll to experts.
Bonus: Common Payroll Mistakes New Employers Make
Missing RTI deadlines
Incorrect tax codes
Forgetting about auto-enrolment pensions
Miscalculating holiday pay
Avoid these mistakes by working with experienced payroll accountants in London who specialise in small business compliance.
Earning client trust since
2022
Conclusion – Simplifying Payroll Services in London
Setting up payroll correctly is vital for new employers in London. From registering with HMRC to issuing payslips, every step matters for compliance and employee satisfaction.
Save this checklist and use it when setting up your payroll. And if you’d rather not handle the complexity yourself, our team at Tax Nest offers expert payroll services in London to make the process simple, accurate, and stress-free.
Phone
+44 2034 226666
info@taxnest.co.uk
