When you set up your company as an employer, it can be hard to keep track of all the numbers and codes related to your business. In your HMRC welcome pack, one of the numbers you will see is your Employer Reference Number (ERN).
This little code is vital for a range of tasks. In this guide, we explore who needs an ERN, why and when.
What is an Employer Reference Number (ERN)?
Every business that registers with HMRC is assigned an ERN. It identifies you as an employer so that:
- Your employees can pay the right amount of income tax and national insurance,
- You can easily track who has worked for an employer and when,
- Your employees can apply for support like student loan or tax credits.
What does an ERN look like?
The ERN has two parts: a three-digit HMRC office number, and a reference number unique to your business. For example, 123/A12345 or 123/AB45678.
Is an ERN the same as a PAYE reference?
Yes. On some tax forms (like your P11D) you may see it called your ‘PAYE reference.’ But don’t get confused with the works or payroll number, your company registration number, VAT number or unique taxpayer reference (UTR). These are not the same as your ERN.
Where do I find my ERN?
You will find your ERN on any correspondence you receive from HMRC, like tax forms, payslips, P45 and P60 forms. It is also in the welcome pack you receive when you first register your business.
When do I need an ERN?
You should quote your ERN in all your correspondence with HMRC. It’s also necessary in the following situations:
Filling out your end of year PAYE return
A missing or incorrect ERN is a common reason for tax returns to be rejected. Save yourself time and money by keeping your ERN to hand.
Employees applying for support
Employees may ask you for your ERN when applying for tax credits and student loans.
Purchasing business insurance
Employers' liability insurance is a legal requirement for any business that has employees, even if you only hire contractors, temporary or part-time staff. When purchasing employers’ liability cover, you’ll need to supply your ERN.
Your ERN helps to identify if somebody worked for you in the event of an insurance claim, especially a historical one.
If, for example, you had employees who worked with asbestos for many years and later developed mesothelioma, the ERN would help to identify the period during which they worked for you.
When should I register for an ERN?
Your ERN is supplied automatically; you do not need to apply for one.
What if I lose my ERN?
The ERN is an important identifier for you and your employees. Even if you aren’t about to complete a tax return, it is vital that you have your ERN available. If you can’t find it, try looking through previous correspondence from HMRC, your welcome pack, or your annual P60.
Can my company have more than one ERN?
An ERN is unique to each business, but if you run separate PAYE schemes across different locations, you might have a different ERN for each scheme.
Which businesses are exempt from having an ERN?
You don’t have to register as an employer with HMRC and therefore won’t require an ERN in the following scenarios:
- If employees are paid as self-employed or are paid by an agency.
- If employees earn less than £113 a week (at the time of writing) and do not also have a pension or another job.
- If employees are working as unpaid volunteers.
- If your company is based in the Isle of Man or the Channel Islands.
Do I need an ERN if I am a sole trader?
ERNs are usually associated with companies, but you could need one even if you’re a sole trader who employs people. Check with HMRC if in doubt.
Does a limited company without employees still need to be registered as an employer?
If you are the sole director of a limited company and the sole employee, you may think you don’t need to register as an employer. However, limited company directors without employees do still need to register for an ERN.
What if I don’t have an ERN?
If you’re certain that you haven’t received an ERN, you may not have registered your company correctly. If you’re already employing staff, you need to register as soon as possible or you could face serious consequences. Register with HMRC as an employer via gov.uk.
It can take up to five days for your reference number to come through, so be sure to register as an employer well before the first occasion you need to pay staff.
It’s possible to register up to two months before the first time you need to pay staff, but no earlier.
If you end up paying an employee before you get your ERN, you can still run payroll. Be sure to keep a copy of the payment details and send a late Full Payment Submission (FPS) to HMRC.
Insurance for businesses with employees
If you’re a small business with employees, don't forget to ensure you have employers' liability insurance to cover your liabilities as an employer. It's a legal requirement in the UK and can cost you up to £2,500 per day in fines for every day you don't have it!