THE DECISION
Choose between a lean HMRC reporting tool, integrated accounting payroll and a payroll specialist based on the tasks you must perform — not employee count alone.
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HMRC Basic PAYE Tools can suit a very simple payroll with fewer than ten employees, but it is intentionally limited. Integrated products can reduce rekeying; specialist payroll can be stronger where pensions, leave and payroll controls matter. Only choose software currently recognised by HMRC.
Options at a glance
| Option | Best fit | Strength | Watch closely |
|---|---|---|---|
| HMRC Basic PAYE Tools | One simple payroll where cost is the overriding concern | Free and performs most core PAYE tasks for fewer than ten employees | Not designed for agents; check its limits on payslips, pensions and workflow |
| Integrated accounting payroll | Owners wanting payroll journals and accounts in one system | Less rekeying between payroll and bookkeeping | Check plan limits, pension functions, support and accountant access |
| Payroll specialist | Employers expecting more staff, varied pay or stronger controls | Purpose-built payroll, pension and approval workflows | May require a separate accounting integration and more formal setup |
| Accountant or payroll bureau | Owners who do not want to operate payroll themselves | Operational expertise and continuity | Clarify deadlines, responsibilities, approvals, access and exit arrangements |
Start with the employer duties
Before the first payday, the employer normally needs to register for PAYE, collect starter information and decide how payroll will be run. HMRC says payroll software must report PAYE information online unless an exemption applies.
The software should calculate pay and deductions, produce the information needed for HMRC and support an on-time Full Payment Submission. But the first-hire workflow also includes employment status, workplace pension duties, payslips, leave, data protection and Employers' Liability insurance.
The first-employee feature test
Do not buy on the promise of 'easy payroll'. Ask the vendor to show the whole first-payday journey: create the employee, apply the starter declaration and tax code, record pension status, process pay, issue a payslip, submit the FPS, post the journal and correct a mistake.
- HMRC recognition for the exact product.
- FPS and, where needed, Employer Payment Summary support.
- Pension assessment, deductions and provider output.
- Statutory pay, holiday, variable pay and corrections.
- Secure payslips, role permissions, audit trail and backups.
- A clean payroll journal into the accounting records.
Free tool, integrated product or specialist?
Basic PAYE Tools is a credible baseline, not a full HR platform. HMRC says it is free for businesses with fewer than ten employees, performs most payroll tasks and has limitations. That can be appropriate for a stable, simple monthly salary if the employer is comfortable handling the surrounding administration.
Integrated accounting payroll can save time when the same owner manages the books. A specialist payroll product is easier to justify when pay varies, pensions need more attention, several people approve payroll or the business expects to hire again soon. Outsourcing may be the best choice when the owner's time and confidence are the constraint.
A controlled first pay run
Calculate the annual cost of the employee before choosing the software, then create a payroll calendar covering cut-off, approval, payday, FPS and payment to HMRC. Give one person responsibility for preparation and another for approval if the team allows it.
Run a parallel check for the first month: gross pay, employee deductions, employer costs, net pay and journal should reconcile. Keep access to reports and employee records if you later change provider.
Primary and official sources
Provider capabilities and rules can change. Follow these links to verify the current position before buying.
Commercial disclosure
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Tool IQ provides general educational information, not financial, tax, legal, employment or accounting advice. Check current rules and obtain professional advice where appropriate.