Running payroll for a one-director company

Plenty of one-person companies pay the director a small salary and take the rest as dividends. The salary goes through payroll like anyone else’s: the company registers as an employer, reports each payment to HMRC in real time, and pays over any tax and National Insurance. Here’s what that involves when the only person on the payroll is you.

Last checked against GOV.UK on 23 October 2026.

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Do you need to run payroll?

Only if the company pays you a salary. Dividends don’t go through payroll. They’re paid out of profits after Corporation Tax and reported on your own Self Assessment return.

If you do take a salary, GOV.UK is clear: “You must register even if you’re only employing yourself, for example as the only director of a limited company.” A director is an office holder, and HMRC treats a director’s salary like any employee’s for PAYE and National Insurance.

Registering as an employer

Register with HMRC before your first payday. Most limited companies can do it online. HMRC posts you two references:

• the employer PAYE reference, which looks like 123/AB45678
• the Accounts Office reference, 13 characters, used when you pay HMRC

GOV.UK says you can’t register more than 2 months before you start paying people, and the letter takes time to arrive, so don’t leave it to the week of your first payday.

The 2026 to 2027 thresholds

These are the figures most one-director companies look at when they set a salary. They’re from GOV.UK’s rates and thresholds for 2026 to 2027.

A salary is a cost to the company, so it reduces the profit that Corporation Tax is charged on. Where to set it depends on your other income, the company’s profit and how much employer’s National Insurance it would pay, so it’s worth checking with an accountant. Whatever you choose, run it through payroll.

No Employment Allowance

The Employment Allowance reduces an employer’s National Insurance bill. HMRC says a company can’t claim it if its only employee paid above the secondary threshold is a single director. Once the company employs someone else above the threshold, it can usually claim.

Each payday: the FPS

A Full Payment Submission tells HMRC what you paid and what was deducted. GOV.UK says: “Send the FPS on or before your employees’ payday.” That applies even if you pay HMRC quarterly.

Then pay HMRC what’s due by the 22nd of the next month if you pay electronically, or the 19th by post. If you usually owe less than £1,500 a month, you may be able to pay quarterly instead. Ask HMRC’s payment helpline.

Months you don’t pay: the EPS

Some directors pay themselves once a year, or only in some months. HMRC still expects to hear from you. GOV.UK says to send an Employer Payment Summary instead of an FPS if you haven’t paid anyone in a tax month, by the 19th after that month. Tax months run from the 6th to the 5th.

The EPS also covers a period of inactivity if you know you won’t pay anyone for a while, and reclaiming statutory pay.

Directors’ National Insurance

A director’s National Insurance works differently from other employees’. HMRC’s manual says a director has an annual earnings period: the thresholds are applied to everything paid in the tax year, not to each month on its own.

That matters if your pay is uneven. A director paid £12,000 in March and nothing else pays National Insurance on the same annual basis as one paid £1,000 a month.

There is an alternative. HMRC allows directors to pay “on account” using the same pay periods as other employees, as long as the company recalculates on the annual basis at the end of the tax year and settles any difference. Payroll software asks which method you use and records it on the FPS.

The tax year end

• Final FPS. Send it on or before the last payday of the tax year, which ends on 5 April, and mark it as the final submission for the year. If you didn’t pay anyone in the last period, send the final report as an EPS.
• P60. Give yourself a P60 by 31 May. It shows your pay and deductions for the year, and you’ll need the figures for your Self Assessment return.

Mistakes that come up

• Paying before registering. If you do, GOV.UK says to run payroll anyway and send the FPS late once you have your PAYE reference.
• Silence in months with no pay. Send an EPS. Otherwise HMRC may expect a payment that isn’t due.
• Working out director’s National Insurance month by month when you’re on the annual method.
• Claiming the Employment Allowance as a sole director with no other employees.

Payroll in A4O Accounts

Payroll in A4O Accounts sends your FPS and EPS to HMRC. Add yourself as an employee, tick Company director and choose the director NI method: annual earnings period or the alternative. It works out tax and National Insurance for 2026 to 2027, sends a test submission before you file for real, and produces payslips and P60s. Each approved pay run posts to your books, so salary and employer’s National Insurance land in the accounts and the Corporation Tax computation without being typed in twice.

You’ll need your employer PAYE reference, your Accounts Office reference and your Government Gateway user ID and password. Payroll is switched on for each company on request, so ask us to turn it on. See what you can file and Corporation Tax deadlines.