Payroll and PAYE for the self-employed

Genuinely self-employed sole traders do not run payroll for themselves – they pay income tax and Class 4 NI through self-assessment. Payroll enters the picture in three situations: hiring a first employee, incorporating as a limited company, or working in construction.

What makes self-employed payroll different

• Hiring your first employee. The moment you employ someone, you need a PAYE scheme, RTI filings every payday, a workplace pension and statutory pay obligations – our employer guide walks through setup.
• Director of your own limited company. Most one-person companies pay a small directors’ salary (commonly around the £12,570 personal allowance or the £5,000 employer NI threshold) plus dividends; that salary still needs a payroll run.
• CIS subcontractors. Self-employed construction workers have 20 or 30 percent deducted at source – see the construction page.
• Cost reality. An accountant or bureau will run a one-person director payroll for roughly £10 – £25 a month, or free software handles it in minutes.

What to look for in a provider

For a first hire, a small local bureau or your accountant is usually the simplest route; for director-only payroll, bundled accountant packages or free software both work. The take-home calculator shows what any salary level nets.

Pricing follows the wider market – see what outsourcing costs (£4 – £10 per employee per month fully managed) – but sector add-ons matter more than the headline rate, so always compare like-for-like quotes.