Do you need a UK payroll at all? Five questions

One: is the person actually an employee

If they are genuinely self-employed, running their own business, working for other clients, controlling their own hours and able to send a substitute, then there is no employment and no payroll obligation. They invoice you and account for their own tax.

Be honest here rather than hopeful, because this is the answer people most want and the one most often wrong. If you direct their work, they are integrated into your team and they work for nobody else, calling it a contract does not make it one.

Two: where is the work actually done

Physically. Not where the contract was signed, not where your company is, and not where the money comes from. If the person sits in the UK and does the work in the UK, UK obligations are engaged even if everything else about your business is elsewhere.

Someone who lives abroad and visits the UK occasionally is a different question, and there are rules for short-term business visitors that may keep you outside a scheme entirely, subject to their conditions, which are worth checking before you rely on them.

Three: do you already have a UK entity

If you have a UK company and it employs the person, you need a normal PAYE scheme. That is the simplest case and the rest of this does not apply.

If you have a UK entity but the person is employed by the overseas parent, it is worth checking properly, because the answer depends on whether the person is working for the UK entity (for example seconded to it). If they are, the UK entity normally has to run PAYE on their pay, even though the parent employs and pays them. The same can apply to a UK client the person is placed with.

Four: is the pay above the thresholds

GOV.UK says you must register for PAYE if, in the current tax year, an employee is paid £96 or more a week, gets expenses and company benefits, gets a pension, has had another job, or has received Jobseeker’s Allowance, Employment and Support Allowance or Incapacity Benefit. A genuinely low-paid part-time role with none of those may not need registering, though you still need to keep payroll records. The moment any one of them applies, you need to register.

This one is worth checking against the current year's figures rather than assumed, because the thresholds move every April and last year's answer may not be this year's.

Five: is there a reciprocal agreement that changes the National Insurance position

Income tax and National Insurance do not always travel together. If a social security agreement (for example with an A1 or a certificate of coverage) keeps the employee in their home-country system, there may be no UK National Insurance to pay, which can remove the need for a UK NI scheme altogether, though UK Income Tax can still be due.

Separately, whether your company owes UK employer’s National Insurance (usual for employers in the EU, the EEA and Switzerland) decides, for an employer with no UK place of business, between a DPNI and an NI-only scheme. That is the question most often skipped. We will ask HMRC for the scheme that fits your facts, and they may suggest a different one once they have the full facts.

When the answer is genuinely no

A genuine contractor with their own business and other clients. A short business visit under the relevant thresholds and time limits. Somebody who lives and works entirely outside the UK for your overseas company, whatever their nationality.

In those cases you do not need a UK payroll, you do not need us, and anybody telling you otherwise should be asked to explain which of these five they think applies.

When the answer is yes and people still delay

Usually because the setup takes weeks and the start date is close, so it feels easier to begin and sort it out later. That is the decision that turns a straightforward registration into arrears with interest, and it is almost always the employee who ends up carrying it.

If you want it answered properly

The route finder covers the core of this. If your case is one of the awkward ones, tell us the facts and we will tell you which of the five decides it, including when the answer means you have nothing to do.

Read next

• The payroll route finder, the same questions, answered interactively.
• Employed or self-employed, the question that decides most of these.
• EOR, DPNI or subsidiary, the routes, if the answer is yes.
• Do you need a UK company, the structural question.

This page is general information, not tax, legal or employment advice, and reflects the published rates for the 2026/27 tax year. Your own position may differ, so please check it or get advice before acting.