What limited companies need to do for payroll — director salary, PAYE registration, RTI filing, pension duties and why most director-only companies are quietly getting the monthly process wrong.
A UK limited company must run payroll through PAYE if any director takes a salary above the Lower Earnings Limit (£6,396 per year). The company registers as an employer with HMRC, processes monthly payroll for the director and any employees, and files a Full Payment Submission (RTI) with HMRC on or before every pay date. If no payment is made in a month, an Employer Payment Summary must still be filed. Both are monthly requirements without exception.
Does every limited company need to run payroll?
Not every limited company runs payroll, but most do. A limited company only avoids payroll registration if no director takes a salary — relying entirely on dividends — and has no other employees.
In practice, most limited company directors take a salary for two reasons: the salary is deductible as a company expense (reducing corporation tax), and it maintains National Insurance contribution records for state pension qualification. A zero-salary, dividends-only approach has its own tax implications that an accountant should review.
Once any salary is paid — even a director salary of £1,047 per month — the company is an employer. PAYE registration is required before the first payment. The monthly payroll obligations begin immediately.
The director salary question: what to pay in 2026/27
Most limited company directors pay a salary at or near the personal allowance of £12,570. This eliminates income tax on the salary while keeping the director on record for National Insurance and state pension purposes.
The exact optimal salary depends on:
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Whether the company qualifies for the Employment Allowance (which offsets employer NI)
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Whether the director has other income sources affecting their personal allowance
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Whether the company has additional employees on the payroll
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The company's profit level and corporation tax position
Salary strategy is accountant territory. The payroll bureau runs the number correctly once the number is confirmed. Getting the number wrong — or not running payroll at all — is a different and more expensive problem.
What limited company payroll actually requires every month
Obligation
Frequency
What happens if missed
PAYE registration
Once, before first payment
Cannot process payroll legally
Full Payment Submission (FPS)
Every pay date, on or before payment
Late filing penalty from £100/month
Employer Payment Summary (EPS)
Any month no salary is paid
HMRC assumes FPS is late — penalty
PAYE payment to HMRC
Monthly by 19th (22nd electronic)
Interest charged on late payment
P60 to each employee
By 31 May after tax year end
Penalty for failure to issue
Pension assessment
Every new starter
Auto-enrolment breach risk
The problem most director-only companies have
The monthly RTI obligation — two filings every month, every year, whether or not a salary was paid — is where most director-only companies fall down.
Accountants who review payroll quarterly or at year end are not meeting the monthly obligation. Payroll software that sits unused for three months before a catch-up run is not filing RTI monthly. HMRC records the gaps and calculates penalties. These appear in due diligence when the company is sold, reviewed for investment or subject to a PAYE compliance check.
A managed payroll bureau files every month without the director needing to think about it. For a director-only company, that service starts from £79 per month.
What about employees as well as directors?
When a limited company takes on its first employee, payroll complexity increases. The company now processes PAYE for two different types of worker — directors (whose NI is calculated annually) and employees (whose NI is calculated monthly). Starters and leavers, holiday pay, sick pay and pension assessments all add to the monthly process.
This is the point at which most directors who were self-managing payroll through software decide to hand it to a bureau. The monthly time commitment becomes significant, and the compliance risk grows with every additional employee.
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Yes, if any director takes a salary — even a nominal one above the Lower Earnings Limit (£129 per week / £6,396 per year). The company must register as an employer with HMRC before the first payment, run monthly payroll, and file RTI submissions every month whether or not a payment was made that month.
The most commonly used director salary in 2026/27 is £12,570 — equal to the personal allowance — to minimise income tax while maintaining state pension qualification. The optimal level depends on whether the director has other income and whether the company qualifies for the Employment Allowance. An accountant should confirm the right level for individual circumstances.
RTI (Real Time Information) requires employers to submit a Full Payment Submission to HMRC on or before every pay date. If no salary is paid in a month, an Employer Payment Summary must be filed instead. Both are monthly requirements. Missing them triggers late filing penalties starting at £100 per month.
Salary paid through payroll is subject to PAYE income tax and National Insurance, deducted at source and reported via RTI. Dividends are paid from post-tax company profits and taxed differently through the director's self-assessment return. The split between salary and dividends is a tax planning decision for the accountant. The payroll bureau manages the salary side.
Either can work. Payroll software requires the director or administrator to run the payroll monthly, file RTI and keep up with rate changes each April. A managed bureau handles all of this. For director-only companies, the bureau cost is modest — typically from £79 per month — and removes the monthly compliance obligation entirely.
HMRC issues late filing penalties starting at £100 per month for companies with up to nine employees. These accumulate. Gaps in RTI records also affect the director's state pension entitlement and can create complications during due diligence if the company is sold or raises investment.