The United Kingdom (U.K.) offers an unmatched talent pool to grow your team, but managing the country’s payroll regulations comes with complexity. From calculating taxes to meeting strict reporting requirements, the admin work is a full-time job.

There’s a simpler way to navigate U.K. payroll. Let G-P’s Global Employment Platform handle the complexity for you. Here’s what you need to know when managing payroll services in the U.K.

How to set up payroll in the U.K.

Using payroll services in the U.K. helps you comply with local regulations. But before you can hire and pay your team members, you need a legal presence in the country, which usually means setting up a subsidiary in the U.K. 

Once your entity is set up, you need to register as an employer with HMRC before paying employees. This allows you to run payroll and report employee pay and deductions to HMRC. Then you can add employees to your payroll system and submit their details through regular payroll reporting. Registration can take up to five working days, so start early to avoid delays. 

Next, collect information from each team member, including:

You’ll need to use payroll software that’s recognized by HMRC and supports real-time information (RTI) reporting, as this is a legal requirement for payroll in the U.K.

An easier alternative is to partner with an employer of record (EOR) like G-P. We handle payroll with 99% accuracy, so your team is always paid on time. With us, you don’t have to set up a local entity or worry about payroll admin. We ensure full compliance with all payroll and employment obligations.

Payroll taxes and social security in the U.K.

All U.K. employers use the pay-as-you-earn (PAYE) system to deduct employee income tax and NI contributions (NICs). 

U.K. personal income tax (PAYE)

Income tax is progressive in England, Wales, and Northern Ireland. The standard personal allowance, which is how much someone can earn before paying tax, is GBP 12,570. The 2025/2026 income tax rates are:

  • Basic rate: 20% on income from GBP 12,571–50,270

  • Higher rate: 40% on income from GBP 50,271–125,140

  • Additional rate: 45% on income over GBP 125,140

Scotland has different income tax rates. For 2025/2026, these are:

  • Starter rate: 19% on income from GBP 12,571–14,876

  • Basic rate: 20% on income from GBP 14,877–26,561

  • Intermediate rate: 21% on income from GBP 26,562–43,662

  • Higher rate: 42% on income from GBP 43,663–75,000

  • Advanced rate: 45% on income from GBP 75,001–125,140

  • Top rate: 48% on income over GBP 125,140

U.K. social security contributions

Employers and employees contribute towards the social security system. NICs fund state benefits, including the state pension.

  • U.K. employer contribution: 13.8% on all employee earnings above GBP 9,100 per year

  • U.K. employee contribution: 8% on earnings from GBP 12,570–50,270, and 2% on earnings above this limit

Employees working beyond the state pension age (currently 66) don’t pay NICs, but employers must still pay their contributions.

Other U.K. business taxes

U.K. businesses may also need to manage:

  • Corporation tax: Paid on company profits. Rates are 25% for profits over GBP 250,000 and 19% for profits up to GBP 50,000, with marginal relief available between these thresholds.

  • Value added tax (VAT): Applied to most goods and services. The standard rate is 20%, with reduced and zero rates for certain items. Businesses must register if taxable turnover exceeds GBP 90,000 in a 12-month period.

  • Apprenticeship levy: Applies to employers with an annual pay bill over GBP 3M. Charged at 0.5% of the pay bill, with a GBP 15,000 annual allowance.

  • Other sector-specific taxes and levies: More obligations may apply depending on the industry.

Elements of payroll administration in the U.K.

  • Payment frequency: There’s no legal requirement for how often employees should be paid. Instead, the pay frequency depends on what’s agreed in the employment contract. The most common payroll cycles are monthly for salaried staff, and weekly for hourly or temporary workers. Fortnightly payments aren’t as common.

  • A 13th-month salary: These aren’t mandatory. Any bonuses are up to the employer and usually outlined in the employment contract. 

  • Payslip requirements: Employers provide every employee with an itemized payslip on or before payday. The payslip must show gross and net pay, all deductions, and hours worked (if pay varies by time worked).

  • Reporting and deadlines: Employers submit a full payment submission (FPS) to HMRC on or before each employee’s payday, reporting pay and deductions for every employee paid in that cycle. PAYE and NI must be paid to HMRC by the 22 of the following month if paying electronically, or by the 19 if paying by post. 

U.K. payroll options for companies

Companies expanding into the U.K. have three main options for managing payroll:

  • Internal payroll: A company with a registered subsidiary in the U.K. and a large HR team can manage payroll internally. This approach requires hiring staff with expertise in U.K. labor and tax law and is often best suited for large organizations with a long-term commitment to the country.

  • Partner with an employer of record (EOR): Working with an EOR like G-P is the most efficient and secure option. As the EOR, G-P handles all payroll, tax, and compliance obligations, allowing you to focus on growing your business.

  • G-P Contractor™: Although independent contractors aren’t part of payroll, some companies rely on this worker type for specialized projects. With G-P Contractor, you can hire and pay contractors in 190 countries and your choice of currency, using a digital wallet, bank transfer, or virtual card.

Paying independent contractors in the U.K.

U.K. independent contracts are responsible for registering for self-assessment with HMRC and paying their own income tax and NICs. They don’t pay PAYE. They pay their taxes directly through the self-assessment process. 

An independent contractor with turnover of more than GBP 90,000 per year must register for and charge VAT on their services. Businesses pay this VAT to the contractor as part of the invoice. When engaging independent contractors in the U.K., remember that the legal and tax obligations differ significantly from those for employees.

Under IR35, also known as off-payroll working, medium and large businesses must assess whether a contractor working through a personal service company is in an “employee-like” role. If so, the business may need to apply PAYE and NICs as if the contractor were an employee. 

Reliable payroll services in the U.K. can help you manage these requirements and keep operations running smoothly.

U.K. entitlement and termination terms

When an employment relationship ends, final pay must include all outstanding wages and pay for accrued annual leave. Employers must provide notice, with legal minimum periods based on length of service:

  • 1 week’s notice for service between one month and two years

  • 1 week’s notice for each full year of service between two and 12 years

  • 12 weeks’ notice for 12 or more years of service

Employment contracts can set longer notice periods. Employees with over two years’ continuous service who’re made redundant get a statutory redundancy payment (SRP).

Let G-P manage your U.K. payroll

G-P is the #1 rated EOR by all top industry analysts. We manage the entire employee lifecycle, including payroll, for your teams in 180+ countries. Get on-time,error-free payroll with flexible payment options and easily add bonuses, commissions, and exceptions in just a few clicks. 

G-P EOR is the preferred partner for leading HCM, PEO, and payroll platforms. Bring your workforce data together in one place to maintain existing workflows while guaranteeing consistent and accurate data across your integrated systems.

Book a demo to learn more about our global employment products and EOR solutions in the U.K.

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