Employers will be required to move to a new way of reporting PAYE in real time, sometimes called Real Time Information (RTI), where they report to HMRC each time they pay employees, rather than annually. This updates the PAYE system so that it is quicker, easier and more accurate.
With the introduction of RTI, employers will benefit from much simpler requirements for reporting to HMRC and the abolition of the extensive annual tax return that the old system required.
David Gauke, Exchequer Secretary to the Treasury, said:
For employees, particularly the 1 million people in the UK with multiple jobs, RTI will bring benefits as HMRC starts to get details of their tax every time their wages are paid, rather than just once a year. This will make HMRC’s records more accurate and up-to-date and will reduce the number of cases where someone is found to have under or overpaid tax during the year.
RTI will deliver the new Employment Allowance, which will reduce the cost of taking on new staff for small business. RTI will make it simple to administer, to ensure maximum take-up and help aspiring businesses grow by hiring employees or expanding their workforce.
Real Time Information will be better for employers and employees. It will bring PAYE into the 21st century.
Ruth Owen, HMRC’s Director General Personal Tax, said:
This will be a year of transition. Employers will start to report PAYE in real time from their first payday on or after 6 April. We understand it may take some time before all employers will get into the routine of real time reporting. But HMRC is here to give help and support, including offering free software for employers with nine or fewer employees, regular live Twitter Q&As, YouTube videos and roadshows across the country.
For the vast majority of employers, the first real time return will be the first employee payday on or after 6 April 2013. To make sure that employers are ready for RTI they should follow these three simple steps:
- Go to HMRC’s website – hmrc.gov.uk/rti – for comprehensive information about RTI, including how to prepare, payroll software options and tips;
- Acquire new or updated software. Employers will need to talk to their payroll software provider or payroll service-provider (and their Bacs software or solution supplier if they pay via Bacs);
- Start checking and updating employee information. It is vital that the information employers have about their employees is up to date.
All employers received letters about RTI in February 2013 and October 2012.
The RTI pilot was launched in April 2012 with just 10 employers. By 31 March 2013, PAYE records for around six million people will be reported in real time.
From April 2014 every business and charity in the UK will be entitled to a £2,000 Employment Allowance to reduce their employer National Insurance Contributions bill each year. The Employment Allowance is permanent, and open to all businesses and charities in the UK, regardless of their age, size or location.
RTI will support the operation of Universal Credit – the Government’s flagship welfare programme – which brings together means-tested in work and out-of-work benefits, Tax Credits and support for housing, and will improve work incentives and make work pay.