Best Payroll Software for UK Sole Traders with One Employee
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The Moment You Take on One Employee, Everything Changes
Hiring your first employee — even part-time — triggers legal obligations that catch sole traders off guard. Register as an employer with HMRC, run PAYE, submit Real Time Information reports on or before every payday, and assess your employee for auto-enrolment. Miss any of these and there are penalties.
The good news: you don’t need expensive HR software to run payroll for one person. Some options cost around a pound a month, and one is free.
This guide compares the best payroll software for UK sole traders with one or two employees, explains what you’re required to do, and gives a straight answer on which to choose.
Before Payroll: The Duties That Aren’t Payroll
Worth flagging, because these carry heavier penalties than anything in the payroll process and payroll guides routinely skip them.
Employers’ liability insurance is legally required for most UK employers, at up to £2,500 for every day you’re uninsured. Right to work checks must be completed before employment starts. And your employee is entitled to a written statement of their main terms on or before their first day.
None of these are handled by payroll software. Sort them first.
What You’re Legally Required to Do
PAYE Registration
You must register as an employer with HMRC before your employee’s first payday — this isn’t optional or advisory.
Two timing constraints matter. You cannot register more than two months before you start paying people, and processing can take anywhere from five to fifteen working days, sometimes longer at busy periods. Register four to six weeks before your first payday.
If your references haven’t arrived by payday, pay your employee on time anyway, prepare the FPS and submit it once they come through.
RTI Submissions
You must submit a Full Payment Submission on or before every payday — not monthly, not quarterly. Every payday. Weekly pay means weekly submissions.
If you don’t pay anyone in a given tax month, you may also need an Employer Payment Summary. Your software should handle both.
Auto-Enrolment Pension Duties
The one that surprises most first-time employers. Even with one employee, you must assess them for auto-enrolment every time you pay them.
An eligible jobholder is broadly someone aged 22 to State Pension age earning above the automatic enrolment earnings trigger — currently £10,000 a year, though check the current figure with The Pensions Regulator, as thresholds are reviewed annually. If eligible, you must enrol them in a qualifying scheme unless they opt out, write to them explaining their rights, keep records, and declare compliance to TPR within five months of your duties start date.
Critically, not all payroll software handles auto-enrolment assessment. That’s flagged for each option below.
The Best Payroll Software for One Employee
1. Sage Payroll — Best Overall for One Employee
Price: from £1.20 per month ex-VAT Auto-enrolment assessment: Yes
Sage is the most recognisable name in UK business software, and at £1.20 a month its payroll product is the cheapest confirmed paid option here by a wide margin — a figure most comparisons get badly wrong, quoting £8 or more.
What it does well:
- Full RTI handling and auto-enrolment assessment at that price
- HMRC-recognised, with compliance updates applied automatically
- Pension integration including NEST
- Phone and live chat support, which matters when you’re doing this for the first time
- Integrates with Sage Accounting if you use it
Where it falls short:
- The interface feels more structured and less modern than newer cloud-native tools
- Onboarding takes more effort than some rivals
- Modular add-ons can increase the cost as you grow
Our verdict: At £1.20 a month with auto-enrolment included, the usual objection to Sage — that it’s expensive at one employee — simply doesn’t hold. For most sole traders hiring their first employee and not already committed to another platform, this is the sensible default. Confirm the current rate and what the entry tier includes before signing up.
2. FreeAgent — Best If You Bank With the Right Provider
Price: free with a qualifying bank account, otherwise from £19 per month ex-VAT for sole traders Auto-enrolment assessment: Yes
FreeAgent combines accounting and payroll, built for freelancers and small businesses. It’s free with NatWest, Royal Bank of Scotland, Ulster Bank or Mettle business accounts — Ulster and Mettle are the ones most comparisons leave off, and Mettle is a free account in its own right.
What it does well:
- Accounting and payroll in one tool, ideal for sole traders
- RTI submissions and auto-enrolment assessment
- MTD-compliant, which matters now that MTD for Income Tax is live
- Genuinely user-friendly
- Potentially free
Where it falls short:
- Payroll is less advanced than dedicated payroll tools
- At £19 a month without a qualifying account, it’s expensive purely for payroll
- Confirm that payroll is included on the sole trader plan at £19 — FreeAgent’s payroll is most commonly associated with its limited company plan at £33 ex-VAT, and this distinction matters if you’re a sole trader employing someone
Our verdict: If you bank with NatWest Group or Mettle, this is close to unbeatable — accounting, tax and payroll for nothing. Check the payroll inclusion on your plan tier first. If you don’t have a qualifying account, £19 for payroll alone is hard to justify against Sage at £1.20.
3. HMRC Basic PAYE Tools — Best Free Option, With Real Limits
Price: Free Auto-enrolment assessment: No
HMRC’s own downloadable desktop application calculates PAYE, National Insurance and student loan deductions and submits RTI returns directly.
What it does well:
- Completely free
- Handles PAYE calculations and RTI submissions, both FPS and EPS
- Available to employers with 9 or fewer employees
- Direct to HMRC, no third party
Where it falls short:
- No auto-enrolment assessment or pension management
- No payslip generation — and providing a payslip on or before payday is a legal requirement, so you’ll need another route
- Dated desktop-only interface, no mobile access
- Minimal support
Our verdict: Genuinely free and genuinely compliant for RTI. But two gaps matter: you’ll handle auto-enrolment yourself, and you’ll need a separate way to produce payslips. Given Sage costs £1.20 a month and closes both gaps, the free option is harder to justify than it looks — unless your employee is clearly outside auto-enrolment and you have a payslip solution.
4. Xero Payroll — Best If You Already Use Xero
Price: payroll availability and add-on cost vary by plan — check current pricing Auto-enrolment assessment: Yes
If you already use Xero for accounting, adding payroll is seamless. It handles RTI, auto-enrolment assessment, pension integration including NEST, and generates payslips.
Note that Xero has renamed its plans. The tiers are now Ignite (£16 ex-VAT), Grow (£37), Comprehensive (£50) and Ultimate (£65) — the old Starter, Standard, Premium and Growing names no longer apply, so figures quoted against those plan names elsewhere are out of date. Payroll availability by tier, and any add-on cost, should be confirmed directly.
What it does well:
- Payroll journals post automatically into your accounts
- Auto-enrolment built in
- Clean interface, employee payslip access online
- Strong support resources
Where it falls short:
- Expensive for one employee if you’re not already a Xero customer
- Payroll availability varies by plan tier
Our verdict: Excellent value if you’re already paying for Xero. A poor reason to sign up if all you need is payroll for one person.
5. Staffology — Payroll-Only Alternative
Price: per employee per month, with minimum charges — confirm current pricing Auto-enrolment assessment: Yes
A cloud payroll platform well regarded for small employer use, handling PAYE, RTI, auto-enrolment assessment and pension filing with a clean, modern interface.
What it does well:
- Full RTI handling, FPS and EPS
- Auto-enrolment assessment and employee communications
- Integrates with NEST, The People’s Pension and Smart Pension
- Good payslip generation and employee self-service
- API integrations with accounting software
Where it falls short:
- Per-employee pricing with minimum charges means the headline rate isn’t what you’ll pay at one employee — get a quote for your actual situation
- More software than a very simple payroll needs
Our verdict: A capable payroll-only option. Price it against Sage at £1.20 before committing, since minimum charges can erode the per-employee advantage at this scale.
Quick Comparison
| Software | Confirmed price | Auto-enrolment | Payslips | RTI | Best for |
|---|---|---|---|---|---|
| Sage Payroll | From £1.20/month ex-VAT | Yes | Yes | Yes | Most sole traders with one employee |
| FreeAgent | Free with NatWest, RBS, Ulster or Mettle, else £19 | Yes | Yes | Yes | Qualifying bank account holders |
| Basic PAYE Tools | Free | No | No | Yes | Zero budget, no auto-enrolment |
| Xero Payroll | Check current — Xero from £16 | Yes | Yes | Yes | Existing Xero users |
| Staffology | Check current | Yes | Yes | Yes | Payroll-only, no accounting needed |
FAQ
What’s the cheapest payroll software for one employee?
Sage Payroll at £1.20 a month ex-VAT is the cheapest confirmed paid option, and it includes auto-enrolment assessment. HMRC’s Basic PAYE Tools is free but handles neither auto-enrolment nor payslips. If you bank with NatWest, RBS, Ulster Bank or Mettle, FreeAgent is free.
Do I really need payroll software for one employee?
Strictly, no — you can use Basic PAYE Tools free. But it doesn’t do auto-enrolment assessment or payslips, and payslips are a legal requirement. At £1.20 a month for software that handles both, the free route saves very little.
What is RTI and how often do I submit?
Real Time Information is how HMRC tracks PAYE. You submit a Full Payment Submission on or before every payday — weekly pay means weekly submissions. Any decent software handles this in the background.
Does Making Tax Digital affect payroll?
No. Payroll runs on RTI, which is separate. MTD for Income Tax went live in April 2026 for sole traders and landlords with qualifying income above £50,000, dropping to £30,000 in April 2027 and a planned £20,000 in April 2028. If you’re in scope, you need MTD-compatible accounting software as well — which is one argument for a combined tool like FreeAgent or Xero.
What pension scheme should I use?
NEST is the government-backed default, free for employers, and has a statutory obligation to accept any employer. A sensible low-friction choice for one employee. The People’s Pension and Smart Pension are alternatives. Most software here integrates with NEST directly.
Do I need employers’ liability insurance for one part-time employee?
Almost certainly. There’s no minimum-hours threshold, and the penalty is up to £2,500 per day. Narrow exemptions exist — check whether one applies rather than assuming.
Conclusion: Which Should You Choose?
If you bank with NatWest, RBS, Ulster Bank or Mettle — use FreeAgent. It’s free, and it covers accounting, tax and payroll in one place. Just confirm payroll is included on your plan tier.
Otherwise, Sage Payroll at £1.20 a month is the default answer. It handles RTI, auto-enrolment and payslips at a price that makes the free option barely worth the compromise. The common claim that Sage is expensive at one employee is simply out of date.
If you already pay for Xero, add payroll there rather than running a second system.
If budget is absolute and your employee is clearly outside auto-enrolment, Basic PAYE Tools works — but you’ll still need a way to produce payslips.
Whatever you choose, don’t delay. Register four to six weeks before your first payday, and remember the RTI and auto-enrolment obligations start immediately.
This article is general information about payroll software, not tax, legal or accounting advice. Your PAYE obligations, auto-enrolment duties and penalty exposure depend on your circumstances — check current GOV.UK and Pensions Regulator guidance and consult a qualified accountant or payroll professional about your position. Rates and thresholds change each April; confirm the current position before acting.