Best Payroll Software for One Employee in the UK (2026)

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You Only Have One Employee — Do You Really Need to Pay for Payroll Software?

If you’ve just taken on your first member of staff — or you’re paying yourself a salary as a limited company director — you might be wondering whether dedicated payroll software is even worth the bother. After all, it’s one person. How complicated can it be?

Fairly complicated, as it turns out. HMRC requires you to report payroll in real time through RTI (Real Time Information) submissions every time you pay someone. You need to handle tax codes, National Insurance, payslips, and pension auto-enrolment. Get any of it wrong and you’re looking at penalties.

The good news? There are some excellent, genuinely affordable options — including one that’s completely free. This guide cuts straight to the best payroll software for a single employee in the UK, with an honest look at what each one costs and who it suits best.

What to Look for in Single-Employee Payroll Software

Before diving into specific tools, it’s worth knowing what actually matters when you’re running payroll for just one person. You don’t need something built for a 50-person team. What you do need is:

• RTI submissions to HMRC — this is non-negotiable
• Automatic payslip generation
• National Insurance and Income Tax calculations
• Auto-enrolment pension support (even if your employee opts out, you still have duties)
• P60 and P45 production
• Making Tax Digital (MTD) compatibility — especially if you use the same platform for your accounts

Ease of use matters too. If you’re running a one-employee business, you’re probably wearing several hats. You don’t want to spend an hour each month wrestling with payroll software that was designed by accountants, for accountants.

The Best Payroll Software for One Employee in the UK

1. FreeAgent — Best Free Option (via NatWest, RBS, Ulster Bank or Mettle)

Cost: Free with a NatWest, RBS, Ulster Bank, or Mettle business bank account

FreeAgent is arguably the best deal in UK small business software, full stop — provided you’re already with the right bank. NatWest, Royal Bank of Scotland, Ulster Bank, and Mettle (NatWest’s digital banking arm) all offer FreeAgent completely free as part of their business current account package. With Mettle you’ll need to make at least one transaction a month to keep it free.

What makes it particularly strong for single-employee businesses is that payroll is built directly into the wider accounting platform. You’re not paying extra for an add-on or bolting on a separate tool. You run payroll, it feeds straight through to your accounts, and everything stays in sync.

What FreeAgent Payroll includes:

• Full RTI submissions to HMRC
• Automatic payslip generation
• Tax code and National Insurance calculations
• P60s and P45s
• Auto-enrolment pension support
• Director’s salary functionality (important for limited company owners)
• Integration with FreeAgent’s invoicing, expenses, and Self Assessment tools

For a sole director paying themselves a salary alongside dividends — one of the most common setups for one-person limited companies — FreeAgent handles the whole picture rather neatly.

The catch: If you’re not banking with NatWest, RBS, Ulster Bank, or Mettle, FreeAgent costs £19/month (plus VAT) for sole traders or £33/month (plus VAT) for limited companies — though it routinely runs a 50%-off-for-six-months introductory offer. That’s a perfectly fair price for a full accounting platform, but it does change the value proposition if you were hoping for free payroll only.

Best for: Limited company directors and small employers already using NatWest, RBS, Ulster Bank, or Mettle — or those willing to switch for the free access.

2. Sage Payroll — Best Dedicated Payroll Option

Cost: From around £12/month (plus VAT)

Sage is the name most UK accountants will recognise, and for good reason. Sage Payroll is purpose-built for payroll — it’s not a feature bolted onto accounting software; it’s the main event. Standard pricing starts at around £12/month plus VAT for the smallest teams, which comfortably covers a single employee and scales on a per-employee basis as you grow. Sage is currently running a promotion (90% off for the first three months, bringing the entry price down to about £1.20/month), so it’s worth checking the live offer.

What Sage Payroll includes:

• RTI submissions directly to HMRC
• Automatic payslip emails to employees
• Tax code and NI calculations
• P60 and P45 generation
• Auto-enrolment compliance tools
• Holiday and absence tracking
• HMRC-recognised software

Sage’s interface has improved considerably in recent years. The online version is much more approachable than older desktop software, and the step-by-step payroll process is clear enough that you don’t need any payroll experience to use it confidently.

Things to consider: Sage Payroll is a standalone payroll product. If you also need accounting, invoicing, or bookkeeping software, you’d either need to pay separately for Sage Accounting or use a different tool altogether. That might mean double data entry unless you find a workflow that suits you. It’s also worth checking the current pricing directly with Sage, as promotional rates are common and the headline price can vary.

Best for: Business owners who want a dedicated, no-frills payroll tool from a trusted provider, at a low monthly cost.

3. Xero Payroll — Best for Existing Xero Users

Cost: From around £17.50/month for one employee (Ignite plan at £16 + £1.50 per employee), or payroll included from the Grow plan (£37/month) upward. All prices exclude VAT.

Xero is one of the most popular accounting platforms among UK small businesses, and its payroll functionality is solid — particularly if you’re already paying for Xero for your accounts. Adding payroll to an existing Xero subscription means everything lives in one place: invoices, bank feeds, expenses, and payroll all talk to each other without any manual reconciliation.

What Xero Payroll includes:

• RTI submissions to HMRC
• Automated payslips
• Tax and NI calculations
• P60 and P45 support
• Auto-enrolment pension management
• Leave tracking
• Employee self-service portal (employees can view their own payslips)

The employee portal is a nice touch even if you only have one person on the books — it looks professional and saves you emailing payslips manually every month.

Things to consider: Xero charges payroll per employee — £1.50 per employee per month on the Ignite, Grow, and Comprehensive plans (£1 on Ultimate) — with a set number of employees already included on each plan (none on Ignite, one on Grow, five on Comprehensive, ten on Ultimate). Xero is not the cheapest option if you’re only after payroll — the full subscription is more than you’d pay for Sage Payroll’s entry tier. But if you’re already paying for Xero, activating payroll makes a lot of sense rather than paying for a second tool.

Best for: Businesses already using Xero for accounting who want to keep everything in one platform.

4. HMRC Basic PAYE Tools — Genuinely Free, No Frills

Cost: Free

Worth a mention for completeness: HMRC offers its own Basic PAYE Tools, free to download and use, designed for businesses with fewer than 10 employees. These handle RTI submissions, tax and NI calculations, payslips, and the core payroll compliance requirements. They’re not pretty, and they won’t win any design awards, but they are free and they do the job for basic payroll.

The limitations are significant for most users — no auto-enrolment support (you’d need a separate tool from The Pensions Regulator or your pension provider), no integration with accounting software, and a desktop-based, fairly dated interface. But if your budget is zero and your payroll is genuinely straightforward, it’s better than doing it in a spreadsheet.

Best for: Absolute beginners with zero budget who want to do the minimum required by HMRC.

Side-by-Side Comparison

Software	Cost	Payroll for 1 Employee	RTI to HMRC	Auto-Enrolment	Accounting Integration
FreeAgent	Free (NatWest/RBS/Ulster/Mettle)	✓	✓	✓	Full (built-in)
Sage Payroll	From ~£12/mo + VAT	✓	✓	✓	Separate product
Xero Payroll	From ~£17.50/mo + VAT (Ignite + add-on)	✓	✓	✓	Full (built-in)
HMRC Basic PAYE Tools	Free	✓	✓	✗	None

Our Recommendation: Match the Tool to Your Situation

There’s no single “best” answer here — it really does depend on your setup. Here’s the short version:

• Use FreeAgent if you bank with NatWest, RBS, Ulster Bank, or Mettle. It’s free, comprehensive, and handles both payroll and accounts in one place.
• Use Sage Payroll if you want a dedicated payroll tool at the lowest possible standalone cost, without paying for a full accounting platform.
• Use Xero Payroll if you’re already on Xero and want to keep payroll in the same ecosystem.
• Use HMRC Basic PAYE Tools if you have no budget at all and just need to meet your legal obligations.

For most one-employee businesses, the choice comes down to FreeAgent (free, if you qualify) or Sage Payroll (cheap, if you don’t). Both are genuinely good products and will keep you on the right side of HMRC without overcomplicating your life.

Frequently Asked Questions

Do I need payroll software if I only have one employee?

Technically, you don’t have to use commercial payroll software — HMRC’s free Basic PAYE Tools are sufficient for most basic setups. However, dedicated payroll software makes the process faster, reduces the risk of errors, handles auto-enrolment, and integrates with your accounts. For the relatively small cost involved, most single-employee businesses find it well worth it.

Is payroll software required for Making Tax Digital?

Making Tax Digital (MTD) applies to VAT for all VAT-registered businesses and, since April 2026, to Income Tax for self-employed people and landlords with qualifying income over £50,000 (MTD for ITSA), with further phases following in April 2027 and April 2028. Payroll submissions use RTI, which is a separate system. That said, using software that keeps your payroll and accounts aligned will make your overall compliance easier. FreeAgent and Xero both support MTD for VAT and are recognised for MTD for Income Tax.

How does auto-enrolment work if I only have one employee?

Auto-enrolment rules apply regardless of how many staff you have. If your employee meets the eligibility criteria (aged 22 to State Pension age, earning over £10,000/year), you must automatically enrol them in a workplace pension. You can use a provider like NEST (which is free for employers to use). Good payroll software will manage the declarations and communications, which saves you a significant administrative headache.

Can I run payroll for just a director’s salary?

Yes — many one-person limited companies pay the director a small salary and top up with dividends. This counts as payroll and requires RTI submissions to HMRC. FreeAgent is particularly well set up for this director-salary-plus-dividends model, handling both sides of the equation within one platform.

Conclusion

Running payroll for one employee doesn’t have to be expensive or complicated. The right tool depends on your banking setup, whether you need accounting software alongside payroll, and how much you’re willing to spend each month.

Our top pick for most single-employee businesses is FreeAgent — particularly if you’re with NatWest, RBS, Ulster Bank, or Mettle, where it’s completely free. It handles payroll and accounting in one tidy package, plays nicely with HMRC’s systems, and is genuinely easy to use without any payroll experience.

If FreeAgent isn’t the right fit, Sage Payroll at around £12/month is an honest, reliable choice that won’t break the bank and will keep your PAYE obligations firmly in order.

Either way, you’ll be in a far better position than trying to muddle through with a spreadsheet — and your one employee will thank you for those neatly formatted payslips.

Pricing and features correct at time of writing. Plans and capabilities are subject to change — always confirm current details on the provider’s website before purchasing.