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PAYE and Real Time Information

From April 6th 2013, Her Majesty’s Revenue & Customs (HMRC) introduced a radical change in the way employers handle and report PAYE for their employees.

Whilst this guide will cover the essential information you need, as with all matters relating to PAYE, you should consult your accountant or payroll provider to ensure compliance with this complex system.

The move to reporting information in real time was the biggest change to the operation of PAYE in over 60 years. Under real time reporting, employers and pension providers (or agents, payroll bureaux and other intermediaries acting on their behalf) send HMRC information about tax, National Insurance Contributions (NICs), student loans and other deductions each time they pay their employees. This enables HMRC to keep more accurate records and, over time, more people will pay the correct tax.

So what are the essential facts you need to know?

  • Reporting PAYE information in real time is mandatory
  • All pension providers moved to reporting PAYE information in real time from April 2013
  • Your payroll software (or agent’s software) will collect the necessary information and send it to HMRC online
  • If you handle your own payroll you need to consider your options for payroll. A wide range of commercial software designed for real time reporting will be available from April 2013 to suit employers’ and pension providers’ individual requirements, including some free products.
  • HMRC’s ‘Basic PAYE Tools’ are also be available for employers who have nine or fewer employees. You can get more information about this here
  • You will need to include information in your Real Time Information (RTI) submissions about all employees
  • HMRC will no longer require the end-of-year Employer Annual Return forms P35and P14, and you won’t need to send forms P45 and P46 to them; instead you will include this information with the information reported in real time.
  • Employers making payments to their employees by BACS, using their own service user number, will need to include a cross-reference in the RTI data submission and their Bacs payment instruction.

What didn’t change?

  • The way tax and National Insurance contributions are calculated will not change
  • You will still need to give employees certificates of tax and NICs paid – form P60
  • You will still need to send expenses and benefits returns (P11D and P9D) annually
  • The dates by which you must pay HMRC stay the same

You can find all the up to date information about RTI here

Operating PAYE in real time

The following information is intended to help you think about things you need to do to prepare for when you start paying staff. There are things you have to do and the sooner you start, the easier it will be. Even if you already have an understanding of PAYE, this guide may contain some useful tips, as well as pointing you in the direction of more detailed information.

Nearly all employers and pension providers report payroll information to HMRC on or before every payday (instead of after the end of the tax year, as was the case before RTI). These reports are made online using payroll software and thankfully you no longer have to separately report new starters and leavers, or send in certain end-of-year forms.

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