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Real Time Information (RTI): forthcoming changes in payroll

In April 2013, how you tell HMRC about the payments and deductions you have made under PAYE will change.

The stressful Year End process of P35 and P14 submission is going away, replaced with a submission each time you pay your staff. This is called Real Time Information, or RTI, and it will mean some changes to how you process your payroll. We've put together this little guide to tell you what you need to know, and to answer some common questions.

What doesn't change under RTI?

PAYE stays the same - using tax codes, deducting tax and National Insurance and calculating pay all works in the same way it does now. How you tell HMRC is changing, not what you are telling them about. Coding notices, messages from HMRC, when you pay HMRC, P60s and P11s all work in the same way they do now, as does reporting a change to HMRC (such as a change in name or address).

What does change?

How and when you tell HMRC about the pay and deductions you have made will change. When RTI starts, you'll have to send HMRC a Full Payment Submission (FPS) that shows the tax, NICs and other deductions on or before the payroll for that period is run. So if you have a monthly payroll then information about each employee will be submitted to HMRC each month. This information will probably be collected automatically by your payroll software, and sent to HMRC online. Forms P35, P14 and P38a will no longer be needed at the end of the year - instead of a full year end submission, you'll just tell HMRC that you are running the final pay run for the year as you process it. New starters will still bring a P45 from their previous employer, but these will no longer be submitted to HMRC. Instead the new starter's PAYE information will be included in the next regular RTI submission when she is first paid. If the new employee does not have a P45 you can still get her to fill in a P46 form and make this the basis of the RTI data submitted for this employee.

What do I need to do to prepare for RTI?

Before you make your first submission to HMRC, you will need to check the information you hold about your employees. This is necessary so that HMRC can check that the details it holds about employees in your company are correct, a process that is known as 'alignment'. Here are some tips from HMRC to help you get the information right:

What other information will be submitted to HMRC?

On your first RTI submission you will need to provide details of all employees who have been employed by you at any time during the current tax year, including those who have now left. All employees must be included regardless of wages. Even employees earning below the Lower Earning Limit (107 per week or 464 per month for 2012-13) who don't at present need to be reported to HMRC will, under RTI , need to be included. (This is to support the introduction of Universal Credit when information about small earnings will be required.) For each employee you will need to provide the following additional information:

On subsequent RTI submissions you will not include employees who have left your employment earlier in the tax year, but only those who are still on your payroll.

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For help with payroll and tax contact Four Elms Bookkeeping on 01935 850807.

Proprietor: Richard Waggett B.Sc., Ph.D., MICB, CBDip.,Dip.PM