Payroll in Limited Companies: Are You Paying Staff the Right Way?

Sep 21, 2025

Payroll in Limited Companies Explained: PAYE, National Insurance & P11Ds for Directors and Employees

Why Payroll Compliance Matters

Running payroll in a limited company isn’t just about paying salaries. Directors must operate PAYE correctly, deduct and report National Insurance Contributions (NICs), and manage employee benefits such as company cars or healthcare through P11Ds.

HMRC expects payroll to be accurate and timely — mistakes can lead to penalties, investigations, and unhappy employees. In this article, we break down the essentials of PAYE, NICs, and benefits reporting so you know exactly what’s required.

PAYE for Directors & Employees

PAYE system: Employers must deduct Income Tax and NICs from salaries before paying staff.
Directors: Directors are treated slightly differently — their NIC is usually calculated on an annual basis rather than per pay period, which can affect cash flow planning.
Employees: Must be issued with payslips, showing tax and NIC deductions, and all payroll must be reported to HMRC via RTI (Real Time Information).

Failure to operate PAYE correctly can result in HMRC fines, interest on late payments, and backdated liabilities.

NIC Rules for Limited Companies

National Insurance Contributions are a key part of payroll compliance:

Employees’ NICs: Deducted at source through PAYE.
Employers’ NICs: Paid by the company on top of gross salary.
Directors’ NICs: Calculated annually, which can reduce overall liability if pay is structured efficiently.

Directors often take a low salary + dividends to reduce NIC costs — but it must be structured carefully to stay compliant and ensure state benefit entitlements are protected.

P11Ds & Benefits in Kind

If directors or employees receive perks such as:

Company cars
Health insurance
Interest-free loans
Other non-cash benefits

…these must be declared on a P11D form each year.

Deadline: 6 July following the end of the tax year.
Additional charge: Employers pay Class 1A NICs (13.8%) on most benefits.

Failure to file P11Ds accurately and on time can result in fines and HMRC enquiries into your payroll systems.

Why Expert Support Matters

Payroll is one of the most common areas where limited companies slip up — whether through late filings, incorrect PAYE deductions, or overlooked benefits in kind.

At Wexley & Associates, we:

Set up and manage PAYE schemes.
Ensure director and employee NICs are calculated correctly.
File P11Ds accurately and on time.
Structure pay packages to minimise tax while staying compliant.

Make Payroll Simple and Compliant

Payroll should run smoothly, without directors worrying about HMRC compliance or penalties. With expert guidance, you can pay yourself and your staff tax-efficiently and stress-free.

Contact Wexley & Associates today for tailored payroll and PAYE support.

References

Payroll in Limited Companies Explained: PAYE, National Insurance & P11Ds for Directors and Employees

Why Payroll Compliance Matters

PAYE for Directors & Employees

PAYE system: Employers must deduct Income Tax and NICs from salaries before paying staff.
Directors: Directors are treated slightly differently — their NIC is usually calculated on an annual basis rather than per pay period, which can affect cash flow planning.
Employees: Must be issued with payslips, showing tax and NIC deductions, and all payroll must be reported to HMRC via RTI (Real Time Information).

Failure to operate PAYE correctly can result in HMRC fines, interest on late payments, and backdated liabilities.

NIC Rules for Limited Companies

National Insurance Contributions are a key part of payroll compliance:

Employees’ NICs: Deducted at source through PAYE.
Employers’ NICs: Paid by the company on top of gross salary.
Directors’ NICs: Calculated annually, which can reduce overall liability if pay is structured efficiently.

Directors often take a low salary + dividends to reduce NIC costs — but it must be structured carefully to stay compliant and ensure state benefit entitlements are protected.

P11Ds & Benefits in Kind

If directors or employees receive perks such as:

Company cars
Health insurance
Interest-free loans
Other non-cash benefits

…these must be declared on a P11D form each year.

Deadline: 6 July following the end of the tax year.
Additional charge: Employers pay Class 1A NICs (13.8%) on most benefits.

Failure to file P11Ds accurately and on time can result in fines and HMRC enquiries into your payroll systems.

Why Expert Support Matters

Payroll is one of the most common areas where limited companies slip up — whether through late filings, incorrect PAYE deductions, or overlooked benefits in kind.

At Wexley & Associates, we:

Set up and manage PAYE schemes.
Ensure director and employee NICs are calculated correctly.
File P11Ds accurately and on time.
Structure pay packages to minimise tax while staying compliant.

Make Payroll Simple and Compliant

Payroll should run smoothly, without directors worrying about HMRC compliance or penalties. With expert guidance, you can pay yourself and your staff tax-efficiently and stress-free.

Contact Wexley & Associates today for tailored payroll and PAYE support.

References

Payroll in Limited Companies Explained: PAYE, National Insurance & P11Ds for Directors and Employees

Why Payroll Compliance Matters

PAYE for Directors & Employees

PAYE system: Employers must deduct Income Tax and NICs from salaries before paying staff.
Directors: Directors are treated slightly differently — their NIC is usually calculated on an annual basis rather than per pay period, which can affect cash flow planning.
Employees: Must be issued with payslips, showing tax and NIC deductions, and all payroll must be reported to HMRC via RTI (Real Time Information).

Failure to operate PAYE correctly can result in HMRC fines, interest on late payments, and backdated liabilities.

NIC Rules for Limited Companies

National Insurance Contributions are a key part of payroll compliance:

Employees’ NICs: Deducted at source through PAYE.
Employers’ NICs: Paid by the company on top of gross salary.
Directors’ NICs: Calculated annually, which can reduce overall liability if pay is structured efficiently.

Directors often take a low salary + dividends to reduce NIC costs — but it must be structured carefully to stay compliant and ensure state benefit entitlements are protected.

P11Ds & Benefits in Kind

If directors or employees receive perks such as:

Company cars
Health insurance
Interest-free loans
Other non-cash benefits

…these must be declared on a P11D form each year.

Deadline: 6 July following the end of the tax year.
Additional charge: Employers pay Class 1A NICs (13.8%) on most benefits.

Failure to file P11Ds accurately and on time can result in fines and HMRC enquiries into your payroll systems.

Why Expert Support Matters

Payroll is one of the most common areas where limited companies slip up — whether through late filings, incorrect PAYE deductions, or overlooked benefits in kind.

At Wexley & Associates, we:

Set up and manage PAYE schemes.
Ensure director and employee NICs are calculated correctly.
File P11Ds accurately and on time.
Structure pay packages to minimise tax while staying compliant.

Make Payroll Simple and Compliant

Payroll should run smoothly, without directors worrying about HMRC compliance or penalties. With expert guidance, you can pay yourself and your staff tax-efficiently and stress-free.

Contact Wexley & Associates today for tailored payroll and PAYE support.