Payroll Service for One Employee (Including Sole Directors)

Managing payroll for just one individual — whether that person is a sole director or the first employee in a small business — may appear straightforward. In reality, UK payroll rules apply equally to all employers, regardless of size. Even a single-person payroll requires accurate calculations, timely reporting, and full HMRC compliance.

A dedicated payroll service ensures that your obligations are met correctly every month or year, helping you avoid penalties and giving you confidence that your PAYE responsibilities are handled efficiently.

Why Payroll Matters Even for One Person

Even with only one employee, employers must meet all statutory requirements, including:

• Issuing payslips
• Running payroll on or before the pay date
• Submitting Real Time Information (RTI) returns to HMRC
• Applying tax codes and National Insurance correctly
• Preparing annual P60 forms
• Completing P11D returns where benefits apply
• Maintaining statutory records for at least three years
• Managing PAYE payments accurately and on time

HMRC does not provide simplified rules for single-employee companies — full compliance is still required.

Payroll for Sole Directors

Director-only payroll has its own unique rules. A sole director is still an employee for PAYE purposes, but National Insurance is calculated differently:

• Directors use an annual earnings period for NI
• Salary levels can be optimised based on thresholds and tax efficiencies
• Payroll can run monthly or annually
• Annual payroll reduces administrative work while remaining fully compliant
• Directors cannot claim Employment Allowance unless they employ additional staff

A payroll service ensures that director NI and salary strategy are handled correctly, which is especially important for companies using a low-salary, high-dividend approach.

Payroll for One Employee

Hiring your first employee brings additional requirements, including:

• Registering as an employer with HMRC
• Collecting starter information (Starter Checklist or P45)
• Applying the correct NI category
• Pension auto-enrolment duties, assessments, and communications
• Ensuring correct treatment of statutory payments (holiday, SSP, SMP, etc.)
• Ongoing filing deadlines and record-keeping obligations

Even for one employee, these duties can be time-consuming and mistake-prone without professional support.

What a Payroll Service Typically Includes

A comprehensive payroll service for a single person normally covers:

• PAYE registration setup (if needed)
• Monthly or annual payroll processing
• RTI submissions to HMRC
• Payslips issued securely each pay period
• Monitoring and applying tax codes
• National Insurance and salary optimisation guidance for directors
• Production of P60 forms at year-end
• P11D preparation where required
• Guidance and reminders for PAYE payments
• Pension auto-enrolment assessments and statutory communications
• Secure payroll record keeping

This ensures that even a small or single-person employer remains fully compliant throughout the year.

Benefits of Outsourcing Payroll for One Person

Even the smallest businesses find value in outsourcing payroll because it:

• Reduces the risk of HMRC penalties
• Ensures accurate application of tax and NI rules
• Keeps employee or director records organised
• Provides consistent payslips for mortgage and financial checks
• Eliminates the need to monitor frequent HMRC rule changes
• Saves time compared with manual calculations or software setup
• Ensures correct handling of director NI rules (a common source of errors)

This is especially helpful for companies where the director manages everything alone and prefers to avoid administrative tasks.

Annual vs Monthly Payroll for Sole Directors

One-person companies often consider two options:

Annual Payroll

Payroll is run once per tax year with one RTI submission. Ideal for directors taking an annual salary and seeking minimal admin.

Monthly Payroll

Provides regular payslips, supports mortgage or finance applications, and works well when combining salary with dividends.

The correct choice depends on income structure, tax planning, and personal preference.

Who This Type of Payroll Service Is For

This service is suitable for:

• Sole director limited companies
• Contractors and consultants
• Start-ups hiring their first employee
• Micro-businesses with a single part-time or full-time worker
• Dormant or low-activity companies needing occasional payroll
• Directors needing a compliant salary for tax planning and dividends

It provides flexibility and compliance regardless of business size.

Summary

Even a single-person payroll requires careful handling. From RTI filings to NI calculations and pension obligations, UK payroll rules remain the same whether you employ one person or one hundred. A dedicated payroll service ensures accuracy, protects you from penalties, and gives you confidence that all statutory duties are completed correctly and on time.