UK business setup and UK payroll go hand in hand for any international company aiming to establish a business in the UK. Whether you’re looking to start a UK business or exploring payroll in the UK for a remote team, getting your structure and systems right from the start can make all the difference.
This guide covers the essentials of UK business setup and UK payroll compliance, with context for non-British businesses and those unfamiliar with UK-specific rules. From PAYE to workplace pensions, we explain the terms, the processes, and where to dig deeper.
Choosing the Right UK Business Setup Structure
The Quick Rundown: Options You’ll Actually Use
- Limited Company (Ltd) – The most popular UK business setup for businesses. It’s a separate legal entity, which protects personal assets. You’ll need to register with Companies House, the UK’s registrar of companies. You’ll also need to file annual accounts and tax returns and pay Corporation Tax on profits.
- Limited Liability Partnership (LLP) – Common among professional services firms. Offers flexibility and limited liability. Profits are taxed at the individual level, meaning each partner includes their share of profits in their personal tax return.
- UK Branch – This UK business setup option lets a foreign company trade directly in the UK. It isn’t a separate entity, so the parent company remains fully liable for any debts. Requires registration with Companies House and submission of the parent company’s financial statements.
- Representative Office – Useful if you’re just establishing a business in the UK to test the market. No commercial activity allowed—it’s strictly for research and brand promotion. You won’t pay Corporation Tax unless you’re seen to be trading.
- Charities and Non-profits – These can register as a Charitable Incorporated Organisation (CIO) or Company Limited by Guarantee. This structure suits those who don’t plan to distribute profits and want limited liability. For more, see GOV.UK’s guidance on setting up a charity.
Explore structure types via this GOV.UK overview or the Companies House blog.
Key Considerations
- Liability – Start a UK business as a limited company (Ltd) or LLP if you want to ringfence personal assets.
- Taxation – Limited companies pay Corporation Tax. LLP members pay personal tax. Charities may be eligible for exemptions.
- Filing Obligations – All UK business structures come with reporting duties, including accounts, tax returns, and confirmation statements. See filing guidance.
UK Payroll: Understand PAYE, RTI and Your Obligations
Once you’ve got your UK business setup in place, you’ll need to sort out your UK payroll obligations. This ensures you remain compliant while paying employees accurately and on time.
1. Register for UK Payroll with HMRC
Before paying staff, register as an employer with HMRC (His Majesty’s Revenue and Customs) through the PAYE setup portal.
PAYE (Pay As You Earn) is the UK’s system for collecting income tax and National Insurance (social security contributions) directly from employee wages. Employers deduct this at source and send it to HMRC.
Processing times vary, so register early if you plan to start a UK business and employ staff.
2. RTI: What It Is and Why It Matters
RTI (Real Time Information) is the system used to report payroll information to HMRC each time employees are paid. It includes:
- Gross pay and tax
- National Insurance contributions
- Employee details and starter/leaver information
Employers must submit RTI reports electronically on or before each payday using compatible payroll software. Learn more on RTI and PAYE.
3. Auto-Enrolment: Workplace Pensions in the UK
If your staff are aged 22 to 66 and earn over £10,000 annually, you must auto-enrol them into a workplace pension scheme. Contributions must be made by both the employer and employee.
The minimum total contribution is currently 8% of qualifying earnings, with employers contributing at least 3%. See full guidance from The Pensions Regulator.
4. Employer of Record (EOR): UK Payroll Without a Legal Entity
If your UK business setup doesn’t yet include a local entity, an Employer of Record lets you hire staff compliantly. They become the legal employer on paper and handle:
- Employment contracts
- Payroll and tax filings
- Benefits and HR admin
This route is ideal for testing UK hiring without a full registration. See Omnipresent or Rippling for examples.
5. Record-Keeping for HMRC Payroll Audits
Employers must keep UK payroll records for at least 3 years, including:
- Payslips and tax codes
- PAYE deductions and pension contributions
- RTI submissions and National Insurance details
Accurate record-keeping is not just a legal requirement—it also helps resolve queries quickly. Full HMRC guidance is here.
Opening a Bank Account After UK Business Setup
Once you’ve finished setting up in the UK, you’ll likely need a local business bank account. It improves credibility and simplifies transactions.
Banks typically request:
- Proof of UK business setup (e.g. incorporation certificate)
- ID and address details for directors
- Company structure chart
Some banks are cautious with international owners, while others specialise in overseas clients. Fees, onboarding times and required documentation vary.
Final Thoughts on UK Business Setup and Payroll
Getting your UK business setup and payroll in the UK sorted is essential groundwork. From choosing a legal structure to meeting HMRC payroll obligations, early planning sets you up to scale confidently.
In our experience, those who take setup seriously are the ones who expand successfully. So, whether you’re setting up in the UK or planning to start a UK business remotely, build compliance into your plan from day one.
Speak to one of our experts or send a message today and find out how we can add value to your relocation programme.
