Employ someone for only a few hours? From 6 April you may need to operate PAYE for the first time.

Under the Pay As You Earn (PAYE) system, employers are required to collect income tax and National Insurance contributions (NICs) for their employee’s wages before they are paid. They must then report their employee’s pay and deductions to HMRC, and pay over any amounts due - including any employer amounts.

You must register with HMRC as an employer and operate a PAYE scheme if any one of the following are true about one of your employees:

• You are paying them at or above a particular threshold (see below)
• They already have another job
• They are receiving a state, company or occupational pension
• They are receiving employee benefits

Historically, the wages threshold (in the first bullet point above) has been the Lower Earnings Limit (this is £123 per week for 2024/25). Below this threshold, no tax or NIC was payable by either the employee or employer on wages. However from 6 April 2025, this threshold has reduced to £96 per week.

Why has the threshold reduced?

From 6 April 2025, there are some changes to the level at which employer National Insurance (NIC) becomes payable - called the Secondary Threshold. These threshold changes mean that some employers will now be liable to pay employers’ National Insurance on wages where previously there would have been none. You can read about the changes on GOV.UK.

The new threshold at which employers will become liable to pay employer NIC is £96 per week and therefore, this is also the point at which employers will need to operate PAYE. This translates to £417 a month or £5,000 a year. For an example of how you apply this threshold in practice, see the example of a registration requirement in our guidance.

  Most employers will be entitled to the Employment Allowance of £10,500 per year in 2025/26, which means that many will not actually have to pay any employer NIC. You still need to register to operate PAYE in order to be able to claim the Employment Allowance (more on this below). 

What all this means is that if you have only one employee, who works a few hours a week for you and earns, say, £100, and has no other job or income, then the conditions above will have been met and you will need to register with HMRC so that a PAYE scheme can be set up for 2025/26. It is important to note that once you have an ‘active’ PAYE employer record open with HMRC, you must send information to HMRC about any other employees, even if they don’t meet the requirements themselves.

What to do if this doesn’t affect you

You still do not need to operate PAYE. However, you will need to keep some basic information about such employees including how much you pay them – see our page on keeping records for more on this. You will also need to give them payslips and comply with your wider employer obligations.

What to do if this affects you

From 6 April 2025, you will need to be in a position where you can operate PAYE. In reality, if you continue to pay your employee at, say £100 a week, and can claim the Employment Allowance, there will not be any deductions to make from the employee or any amounts to pay to HMRC. However, there will be some formalities to complete to keep on the right side of HMRC.

The first step is to register with HMRC for a PAYE scheme. You should do this in advance of the first payday that will fall after 6 April 2025. You should try and start the process as soon as possible as it can take a few weeks for HMRC to process the registration and send your employer PAYE reference number. Read on for further help and next steps!

I have to operate PAYE for the first time – help!

If you have to operate PAYE for the first time, you basically have two choices – do it yourself or use a payroll provider. We discuss this in our guidance for new employers.

If you are hesitant to take on the admin that goes with operating a payroll, or are anxious about making mistakes then that is totally understandable. If you can afford to pay a payroll provider, they can look after all or some of the necessary PAYE tasks, reporting and record keeping. The exact payroll service you receive will depend on the provider that is chosen and the contract that is agreed with them. If you run a business, the cost should be a tax deductible expense.

  Important note: be aware that even if you use a payroll provider, you are ultimately still responsible for ensuring that your obligations are met.

You may want to try and run your payroll yourself. Running a payroll yourself may seem like a daunting prospect, but we have lots of guidance on our website that explains some of the main considerations and highlights the guidance available on GOV.UK in those areas, to get you started.

This includes:

• Registering with HMRC as an employer – this can be easier than it sounds. We provide step-by-step instructions in our guidance.
• Reporting information to HMRC - ‘Real time information’ (RTI) is the system used for sending payroll information to HMRC – usually every payday. There are two ways you can send the information – online, or, if certain requirements are met, by paper.
• Getting payroll software - For online filing, payroll information is submitted digitally to HMRC via payroll software. There are several options on the market including some free ones like HMRC’s Basic PAYE Tools (BPT), which is simple, secure and reliable. We explain the options further in our guidance.
• Claiming the Employment Allowance if you are eligible - you usually do this through your payroll software, year on year.
• Dealing with errors: While the system can occasionally go wrong (as set out in this recent report by the Chartered Institute of Payroll Professionals), for most small employers, with straightforward arrangements this would be rare. Most of the tasks required under PAYE can be done at the touch of a button using payroll software and any errors can usually be rectified quickly and easily. There is also guidance and support available on our website and via GOV.UK.