Payroll is one of the most critical responsibilities for any UK employer. It affects how you pay your staff, what you report to HMRC, and how you manage things like pensions, deductions, and benefits. Whether you're just paying yourself as a director or overseeing a growing team, the right payroll software can make the process smooth, accurate, and stress-free.

This guide explains everything UK employers need to know about running payroll, from calculating gross pay and net pay to choosing the best tools and submitting reports to HMRC.

What Is Payroll? (Definition)

Payroll is the process of calculating and distributing wages to employees, including tracking hours worked, calculating gross pay and net pay, applying deductions, and processing statutory payments. It also includes producing payslips, maintaining employee records, and ensuring all submissions to HMRC are accurate and timely.

The payroll process is at the heart of business operations. It ensures your employees are paid correctly and on time, that tax and National Insurance contributions are handled properly, and that you stay compliant with UK employment laws.

Do I Need Payroll If I’m a Sole Director?

Yes. If you’re a director paying yourself a salary through PAYE, you’ll need to run payroll, even if you're the only employee. This ensures taxes, pensions, and other deductions are calculated correctly. It also allows you to issue proper payslips and comply with HMRC requirements.

Can I Run Payroll Myself?

Yes, many small business owners choose to run payroll themselves. With the right payroll software, it’s entirely possible. But be aware, if you make mistakes, the consequences can be costly.

Running payroll involves:

Using software like Aigence, Sage, or QuickBooks simplifies this entire process.

Is Payroll Software Legally Required?

While payroll software is not a legal requirement, if you’re operating PAYE, you must report in real-time to HMRC. Digital submissions are mandatory, and software makes these submissions far easier and more accurate.

The best payroll software options handle everything from tax codes and pensions to RTI submissions and payslips, so you can stay focused on running your business.

Can I Change Payroll Software Mid-Year?

Yes. You can switch payroll software at any time during the tax year. Just ensure your Year-To-Date (YTD) data, including employee information, previous payslips, gross pay, deductions, and benefits, is transferred accurately.

Most major providers, including Sage and QuickBooks, offer full product support to help with migration. If you’re switching to Aigence, we offer a step-by-step onboarding plan.

Understanding Gross Pay vs Net Pay

Gross Pay

Gross pay refers to an employee’s total earnings before any deductions, such as tax, National Insurance, or pension contributions. This is the figure agreed in your employment contract.

Net Pay

Net pay is what your employee takes home after all deductions are made. It’s the amount transferred into their bank account.

Having clear visibility of gross and net pay helps employers maintain transparency and build trust with staff.

HMRC Submissions and Compliance

Submitting accurate payroll information to HMRC is a legal requirement. This includes:

Using trusted software like Sage, QuickBooks, or Aigence ensures all your HMRC submissions are timely and accurate.

Managing Deductions and Statutory Payments

Deductions include income tax, National Insurance, pension contributions, student loan repayments, and court orders. Payroll software automates these calculations to reduce the risk of error.

Statutory payments such as sick pay, maternity pay, and shared parental leave, must be handled properly to remain compliant and ensure fair treatment of staff.

Workplace Pensions and Auto-Enrolment

All employers must offer a workplace pension scheme and automatically enrol eligible employees. Payroll software handles enrolment, opt-outs, and contributions with ease.

Ensuring accurate pension management is key to compliance and staff satisfaction.

Making Timely Payments to Staff

Payroll is not just about calculations, it’s also about making accurate and timely payments. Staff rely on this, and delays can lead to dissatisfaction and even legal issues.

Software solutions automate the payment process, ensuring each employee is paid on time and receives accurate payslips.

Payroll Accounting for Small Businesses

Integrating Payroll and Accounting

Integrating payroll software with your accounting system helps streamline operations and ensures accurate record-keeping. Many platforms offer direct integration with tools like Sage, QuickBooks, and Xero.

This alignment helps reduce errors, simplifies audits, and supports financial planning.

Benefits of Modern Payroll Software

Modern payroll software goes beyond compliance. It offers:

Choosing the right tool also makes it easier to scale as your team grows.

Supporting Your Staff With the Right Payroll Plan

The best payroll systems empower staff by providing transparency, timely payments, and access to digital payslips. They also help you, the employer, by saving time, reducing errors, and simplifying compliance.

Choosing Payroll Software: Key Considerations

When evaluating payroll software, look for:

Sage remains a strong contender for established businesses, while Aigence offers a fresh, AI-first approach designed specifically for UK small business owners. QuickBooks is another user-friendly option known for tight integration with accounting tools.

Final Thoughts: Get Started With a Free Trial

Payroll doesn’t need to be complicated. With the right payroll software, you can save time, stay compliant, and support your staff more effectively. Most providers including Sage, QuickBooks, and Aigence offer free trials so you can test the features and experience before committing.

Meet Aigence: Smart Payroll for UK Small Business Owners

Aigence is a payroll platform built to help UK small business owners take control of payroll, fast. From gross pay and deductions to RTI and workplace pensions, our AI-first cloud platform does the heavy lifting.

Start your free trial today at www.aigence.io