Running payroll in house can give you more control over costs and processes, but it also increases your responsibilities to HMRC. One of the most common areas where businesses make mistakes is dealing with new starters. If you follow a clear onboarding process, you can reduce errors, avoid payroll delays and stay compliant with PAYE rules.

This guide explains how to deal with new employees in your payroll system, what information you need to collect, how to apply the correct tax code, and what you must report to HMRC in the UK in 2026.

Understand Your PAYE Responsibilities

When you hire someone, you become responsible for operating PAYE. This means calculating Income Tax and National Insurance Contributions, reporting pay and deductions to HMRC under Real Time Information, and keeping payroll records up to date. Even small mistakes can lead to incorrect pay, compliance issues and time consuming corrections.

Collect the Right Starter Information

Before you run the first payroll, collect the information you need to pay the employee correctly and to meet HMRC record keeping requirements. This should include their full name, address, date of birth, National Insurance number if available, start date, job title, pay rate and payment frequency.

You should also confirm their right to work status and keep relevant evidence on file. This is separate from payroll but is often handled at the same stage of the onboarding process.

Use a P45 When Available

If the new starter has left a previous job, they may provide a P45. A P45 contains pay and tax information for the current tax year, as well as the tax code that was in use. Using a valid P45 helps you apply the correct tax code and reduces the risk of over or under taxation.

Enter the P45 details into your payroll software carefully. Errors in figures or tax code entry can cause tax issues that may take months to resolve.

Starter Declaration When There Is No P45

If the employee cannot provide a P45, you must ask them to complete a starter declaration. Most payroll software will guide you through this process, and it aligns with HMRC requirements for new starters.

The starter declaration helps you decide which tax code to apply until HMRC issues a code. The employee will typically confirm whether this is their only job, whether they have another job, or whether they are receiving a pension.

Apply the Correct Tax Code

Using the correct tax code is essential for accurate payroll. A tax code determines how much tax free pay an employee receives and how much Income Tax is deducted. If you use a basic or emergency code unnecessarily, the employee may pay too much tax and may need to claim it back later.

Once you submit payroll under Real Time Information, HMRC may send an updated tax code notice. Update the tax code in your payroll system as soon as it is received and apply it from the correct pay period.

Set Up Real Time Information Submissions

In the UK, employers must report payroll information to HMRC each time they pay employees. This is done using a Full Payment Submission. Your payroll software normally sends this directly to HMRC, but you must ensure it is submitted on or before the payday.

If you run payroll late or send information after payday, you risk late filing penalties and compliance issues. Building a consistent payroll routine reduces this risk.

Confirm National Insurance Category

National Insurance is not the same for every employee. The correct National Insurance category depends on factors such as age, apprenticeship status, and eligibility for certain reliefs. Using the wrong category can lead to incorrect deductions and employer costs.

Most employees will fall into a standard category, but you should check the details carefully for younger employees, apprentices and those who may qualify for special categories.

Check Workplace Pension Duties

New starters may need to be assessed for workplace pension auto enrolment. Employers must assess employees based on age and earnings and then enrol eligible employees into a pension scheme. You must also provide statutory communications to the employee explaining their rights and options.

Even if an employee is not eligible, you still have duties to keep records and to allow employees to opt in or join if they meet the relevant conditions.

Set Up Payroll Records and Maintain Evidence

Accurate record keeping is essential for payroll compliance. Keep records of pay, deductions, tax code notices, pension assessments, and starter documentation. Payroll records should be retained for the required period and must be available if HMRC requests evidence during a compliance check.

Organised payroll records also make year end procedures easier and reduce the risk of errors when preparing reports and summaries.

Common Payroll Mistakes With New Starters

Many payroll issues happen at the first payment stage. Common mistakes include using the wrong start date, applying the wrong tax code, failing to submit payroll to HMRC on time, missing pension assessment steps, and not recording starter documentation correctly.

A checklist approach for each new starter can reduce these risks and ensure each employee is set up correctly before the first payday.

Final Thoughts

Running your own payroll is achievable, but new starters require careful handling to keep everything correct from day one. If you collect the right information, apply tax codes properly, submit Real Time Information on time and meet pension duties, you can avoid most payroll problems before they happen.

If you are unsure about onboarding a new employee or managing PAYE, professional advice can help you stay compliant and run payroll smoothly throughout the year.