A Simple Guide to operating a UK Payroll for overseas companies

What Is UK Payroll for Overseas Companies

Running a UK payroll means registering as an employer with HMRC and taking on responsibility for deducting income tax and National Insurance from employee salaries through the PAYE system, then paying that amount over to HMRC on a set schedule. Payroll is most commonly run monthly in the UK, though weekly cycles are also possible depending on how your business pays staff.

Beyond PAYE and National Insurance, other deductions are commonly collected through payroll where applicable, including Student Loan repayments and pension contributions. Alongside what’s deducted from the employee, the employer separately pays Employer National Insurance, calculated on employee salaries, which is a direct cost to the business rather than a deduction from pay.

Running Payroll In-House vs Outsourcing

Some overseas companies choose to run UK payroll in-house, using payroll software that handles RTI submissions directly. This can work well once a business has UK payroll expertise on staff, but it means building and maintaining knowledge of a tax system that’s likely unfamiliar, and staying current as rates, thresholds, and reporting rules change each tax year.

Outsourcing payroll to a UK provider shifts that burden elsewhere. A payroll provider handles registration, calculates the correct deductions each pay period, submits RTI reports on time, and manages statutory payment calculations, while your business focuses on the parts of UK operations that need direct oversight. For most overseas companies employing a small UK team, this tends to be the more practical route, since building in-house UK payroll expertise for a handful of employees rarely makes financial sense.

Whichever route you take, the underlying obligations to HMRC don’t change, what changes is who’s carrying out the mechanics day to day.

Why It Matters for Overseas Companies

Miscalculating UK payroll is costly for both employer and employee. Underpaying tax or National Insurance can leave the business liable for the shortfall plus interest, while errors in an employee’s pay affect their trust in the business at exactly the point you’re trying to build a UK team.

There’s also a rhythm to UK payroll that’s easy to miss if you’re used to a different system. RTI reporting has to happen on or before each payday, not after, and once data is submitted it can’t be overwritten or resubmitted if you spot a mistake, it has to be corrected through a separate process instead. Understanding this before your first payroll run matters more than trying to fix it after an error has already gone to HMRC.

How It Works in the UK

Registration happens through HMRC’s employer registration service, after which you receive your PAYE and Accounts Office references. From there, each payroll run follows the same pattern: calculate gross pay, deductions for tax, National Insurance, and any applicable Student Loan or pension contributions, then submit the RTI report to HMRC on or before the payment date.

When a new employee joins, they’ll need to provide a P45 from their previous employer, or complete HMRC’s Starter Checklist if they don’t have one, which determines the correct tax code to apply. HMRC will advise the correct tax code for each employee, including any zero or negative codes that apply to their specific circumstances. When an employee leaves, they need a P45 showing their leaving date, taxable pay for the year to date, tax paid, and their tax code.

Payroll taxes collected during the month are payable to HMRC between the 6th and 22nd of the following month, so tax collected on a 31 March pay date, for example, is due to HMRC after 6 April but before 22 April.

Key Compliance Requirements

Employer National Insurance is charged at 15% on employee earnings above the secondary threshold, which stands at £5,000 a year (£417 a month, £96 a week) for 2026/27. This is a direct cost to the employer, calculated separately from the deductions taken from the employee’s own pay.

The Employment Allowance can reduce this liability. For 2026/27, eligible employers can claim up to £10,500 off their annual employer National Insurance bill, a significant increase from the £5,000 allowance that applied in earlier years. Not every business qualifies, single-director companies with no other employee paid above the threshold generally can’t claim it, so it’s worth checking eligibility before assuming it applies.

Statutory payments, Statutory Sick Pay, Statutory Maternity Pay, Statutory Paternity Pay, and Statutory Adoption Pay, are all processed through payroll. Some of these can be partially recovered from HMRC, with the recoverable amount depending on how much Employer and Employee National Insurance the business paid that year, and reclaimed by reducing the next payroll tax payment accordingly.

At year end, which falls on 5 April, employers must submit a final report to HMRC and issue every employee with a P60 summarising their total pay and deductions for the year, along with reporting any expenses and benefits provided.

Common Mistakes International Businesses Make

The most common mistake is treating RTI reporting as something that can happen after payday rather than on or before it. Because submitted data can’t simply be overwritten, errors caught after submission require a separate correction process, which is more time-consuming than getting the submission right the first time.

Another frequent issue is overlooking the Employment Allowance, or assuming outdated figures still apply. Given how significantly the allowance and the underlying National Insurance thresholds have shifted in recent years, businesses working from older guidance can end up overpaying, or missing a claim they’re entitled to.

Businesses also sometimes underestimate how much administrative rhythm UK payroll requires, new starter processing, leaver documentation, year-end reporting, and correct handling of statutory payments, all running alongside the core monthly pay run. Underestimating this workload before deciding whether to run it in-house is a common source of later frustration.

How Paul Beare Helps With This

Our payroll services  cover the full cycle for overseas companies: applying to HMRC for your PAYE scheme, weekly or monthly payroll processing including PAYE, National Insurance, and Student Loan repayment calculations, and statutory leave calculations with the associated recovery claims.

We also handle RTI reporting, process starters and leavers, complete year-end reporting and P60 issuance, and act as your point of contact for HMRC. If we’re added to your bank mandate, we can pay salaries and payroll taxes directly on your behalf following your approval, or alternatively provide a payroll summary for your own team to process payments from. If you’re still working through the earlier step of registering as an employer, our register a UK PAYE scheme guide covers that groundwork.