Last week HM Revenue & Customs (HMRC) launched a video guide to help to introduce employers to new Real Time Information (RTI) procedures, including what it means for them and what the main changes will be.
According to HMRC, RTI is a new way for employers to report their employees’ pay and tax details. It will make it easier for employers, pension providers and HMRC to administer PAYE. Employers and pension providers will be able tell HMRC about PAYE payments at the time they are made rather than at the end of the year.
RTI will only affect the submission of PAYE information and payment arrangements will remain unchanged. Most employers will be legally required to report payroll information in real time from April 2013, with all employers doing so before October 2013.
The fundamentals of PAYE such as the use of codes, employers deducting tax and National Insurance, will remain unchanged, but RTI will change how and when employers and pension providers will report information to HMRC. It will also help to support the introduction of Universal Credits.
New software will be needed, to cope with all these returns. And new internal systems will be needed, to ensure that the payroll department is provided with information promptly.
Employers and pension providers will send information to HMRC online for payments made to all their employees, including those paid below the National Insurance Lower Earnings Limit.
Under RTI, HMRC will be receiving information when or before payments are made and will be better able to ensure the correct deductions are made from pay. This will mean that more employees will pay the correct amount of tax and National Insurance in the tax year.
The new system will not affect the self-employed.
As an accountant, Simon Denton specialises in providing PAYE advice, support and guidance.