To do payroll, you collect each employee's tax forms, work out gross pay, take off tax and other deductions, pay the net amount, then report and pay the withheld tax to the government on its schedule. In the US that means W-4s, FICA, deposits and Form 941 each quarter. In the UK it means PAYE: a Full Payment Submission every payday and paying HMRC by the 22nd.
Payroll looks intimidating because it touches tax law, but the routine is the same every pay period once it's set up. This guide follows the IRS's own Publication 15 for the US and GOV.UK's running payroll guide for the UK, so the steps match what the tax authorities expect.
How to do payroll in the US
Before the first payday
- Get an employer identification number (EIN) if you don't have one.
- Verify each new employee's eligibility to work in the US by completing Form I-9.
- Record each employee's name and Social Security number from their Social Security card.
- Ask each employee for a Form W-4 so you know how much federal income tax to withhold.
- Register with your state for state income tax withholding and unemployment tax, and report the new hire to your state.
Our guides to the EIN for small businesses and the Form W-4 walk through those first two forms.
Every payday
- Work out gross pay from salary, hours and any overtime.
- Withhold federal income tax using the employee's W-4 and the IRS tables.
- Withhold the employee's share of Social Security and Medicare tax.
- Add the employer's matching share of Social Security and Medicare.
- Pay the employee the net amount, and keep a record.
The US payroll tax rates for 2026
| Tax | Employee | Employer | Limit, as of October 2026 |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | Wage base limit $184,500 |
| Medicare | 1.45% | 1.45% | No wage base limit |
| Additional Medicare Tax | 0.9% on wages above the threshold | None | Withheld once wages pass the threshold |
| FUTA (federal unemployment) | None | 6.0% before credits, usually 0.6% after | First $7,000 per employee |
State unemployment tax and state income tax sit on top of these. Our guide to US payroll taxes explains how each one works.
Depositing US payroll taxes
You don't send withheld tax to the IRS whenever you like. You deposit it on one of two schedules, and the IRS decides which from your lookback period, not from how often you pay staff.
For Form 941 filers, the lookback period for a calendar year runs from July 1 to June 30. If you reported $50,000 or less of taxes in that period, you're a monthly schedule depositor. If you reported more than $50,000, you're a semiweekly schedule depositor. The detail new businesses miss: the IRS treats your lookback liability as zero before you started, so you're a monthly schedule depositor for your first calendar year, depositing each month's taxes by the 15th of the following month. A separate next-day deposit rule applies once you build up $100,000 or more in a deposit period.
US filing calendar
| When | What to file |
|---|---|
| Quarterly: by April 30, July 31, October 31 and January 31 | Form 941, the quarterly federal tax return |
| Annually | Form 940 for FUTA, and Forms W-2 and W-3 for each employee |
| Each payday | Withhold and record taxes; deposit on your schedule |
If your FUTA liability for the fourth quarter is over $500, deposit the whole amount by the due date of Form 940, January 31. Our Form 941 guide covers the quarterly return line by line.
How to do payroll in the UK
In the UK you run payroll through PAYE using payroll software. Before an employee's first payday you must tell HMRC about them, using their P45 or HMRC's starter checklist if they don't have one.
Every time you pay employees
- Record their pay, including salary or wages and any other pay.
- Calculate deductions, such as tax and National Insurance.
- Calculate the employer's National Insurance on earnings above the threshold.
- Produce payslips for each employee.
- Report pay and deductions to HMRC in a Full Payment Submission (FPS).
Watch the threshold here. HMRC's rates and thresholds for employers for 2026 to 2027 put the employer's secondary threshold at £96 a week (£5,000 a year), with employer National Insurance at 15% above it for most employees, as of October 2026. The £242 a week figure you'll see quoted is the employee's primary threshold, not the employer's, so don't let software defaults or an old guide mix them up.
Every tax month
Tax months run from the 6th of one month to the 5th of the next. Each month you can view what you owe from your FPS online from the 10th. Send an Employer Payment Summary (EPS) by the 19th to claim any reduction, such as for statutory pay, and send one if you didn't pay anyone that month. Then pay HMRC by the 22nd, or the 19th if you pay by post.
If you usually pay less than £1,500 a month, you may be able to pay HMRC quarterly instead of monthly, as of October 2026.
What happens if you get it wrong
In the UK, HMRC sends a late filing notice and can charge a penalty if you pay employees and don't send an FPS, or send it late, unless you have a valid reason. Late or wrong reports can also affect employees' benefits such as Universal Credit. And if you're a new employer, HMRC will close your PAYE scheme if you don't send a report or pay HMRC within 120 days.
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In the US, late deposits carry penalties, and the deposit schedule rules apply to every employer. That's why getting the schedule right in month one matters more than any software choice.
Software or DIY?
You can run payroll by hand in the US with the IRS tables, but most small businesses use software because it calculates withholding, files returns and keeps records. In the UK, GOV.UK assumes you're using payroll software for every pay run, since the FPS has to be sent electronically.
Staff leaving mid-year raise their own timing rules, and our guide to final paycheck deadlines sets out when the last paycheck is due.
My verdict
Doing payroll yourself is manageable for a small team once the setup is right: the forms on day one, the right deposit schedule in the US and the FPS-EPS-22nd rhythm in the UK. The mistakes that cost you are timing mistakes, not maths mistakes. Put every deadline in your calendar before the first payday and you're most of the way there.
The first step above is an EIN, and our guide to getting an employer identification number walks through who needs one and how to apply.
Frequently asked questions
How do I do payroll for the first time?
Collect each employee's tax forms (a W-4 and I-9 in the US, or a P45 or starter checklist in the UK), work out gross pay, deduct tax and other withholdings, pay the net amount and report and pay the tax on the government's schedule.
How often do I deposit payroll taxes in the US?
It depends on your lookback period. If you reported $50,000 or less of taxes in the lookback period you deposit monthly; if more, you deposit on the semiweekly schedule.
What are the US payroll tax rates for 2026?
Social Security is 6.2% each for employer and employee on wages up to $184,500, and Medicare is 1.45% each with no wage base limit, as of October 2026.
When do UK employers pay HMRC?
By the 22nd of each tax month, or the 19th if paying by post. Employers who usually pay less than £1,500 a month may be able to pay quarterly.
What is a Full Payment Submission?
It's the report UK employers send to HMRC every time they pay employees, showing pay and deductions. It's sent from payroll software on or before payday.
