Change in PAYE structure

Under the present PAYE system employers tell HMRC what deductions they have made from employees’ pay at the end of the year, but in nine months PAYE will be reported in real time, Real Time Information (RTI).

Reporting PAYE in real time ensures that employees’ tax records are accurate and reduces the chance of PAYE overpayments or underpayments at the end of every tax year. This will also provide accurate records on wages and tax for the forthcoming Universal Credit, meaning eligible employees will get the right amount of benefits or tax credits every month. PAYE itself will not change; it will merely be the way and how often employers send PAYE details to HMRC.

Details will have to be sent every time a payment is made. Payroll software must be used to send the data electronically and as part of a normal payroll process. It’s estimated that, once implemented, RTI will remove £300 million of administration burdens every year.

RTI is being introduced gradually, with around 300 volunteers taking part in the test pilot in April 2012. Most employers will begin reporting PAYE in real time in April 2013, with all doing so by the following October.

HRMC’s head of RTI communications Jane Brothwood said: “Businesses of all sizes should start preparing for RTI now by talking to their payroll software provider or payroll service provider about how they are developing appropriate payroll software.

“It’s also vital that employers check that information about their employees is accurate and up to date. This involves making sure that surname, forename, gender, address, date of birth, and National Insurance number are correct and in the right format. Employers should also make sure that they add staff to their payrolls who will now need to be included with their RTI submissions – for example, those under the lower earnings limit (LEL).

More information about RTI can be found at www.hmrc.gov.uk/rti