If you are an employer, you’ll know all about PAYE. RTI (standing for Real Time Information), is the biggest reform to the PAYE system since 1944, when it was introduced. It has been introduced in order to support the Government’s new Universal Credit system, making it easier for people’s entitlement to be assessed.
What is RTI?
Under the PAYE system, you deduct any tax owed by your employees from their wages prior to paying them. Every time you pay your employees, you pay the tax they owe to HMRC, but you don’t have to declare your PAYE until the end of the year, using a P35 form.
With RTI, you will now have to submit your PAYE information at the same time as paying your employees and their tax. HMRC will have all the information regarding your employee’s wages and the tax they have paid, allowing the Department of Work and Pensions to easily assess people’s liability for Universal Credit.
RTI could have significant changes on the way your business operates. We’ve detailed a few below.
Software will need updating
If you use automatic payroll software, you will need to update it to the latest version that supports RTI. Payroll software can automatically submit the required information to HMRC on your behalf. As long as your software is updated to support RTI, everything will still be taken care of automatically.
If your software does not support RTI, you made need to change it, or start using HMRC’s Basic PAYE Tools.
Penalties for late RTI reporting
HMRC will issue penalties if you fail to report your RTI when it is due. When you have to pay your RTI will be dictated by how often you pay your employees; RTI must be submitted with the same frequency. The penalties will be issued directly to you as the employer, and will apply for each instance of late RTI reporting. This could therefore become very costly for employers who haven’t taken the time to ensure the systems are in place to support RTI.
Greater data accuracy
When larger employers join the RTI scheme, their payroll data must be aligned with the records HMRC keeps in order to ensure the two reconcile. Therefore it is vital that you check to make sure your records, including National Insurance numbers and dates of birth, are all correct and verified. Incorrect data could cause complications further down the line and affect your ability to submit your RTI when required.
Make sure you have the right system in place
Failing to have the correct system and data could result in complications, or incur large financial penalties if those complications mean your RTI is not filed on time. We are fully equipped to deal with PAYE RTI, and our knowledge and experience of management accounts allows us to manage the transition smoothly, so you can continue to focus on your business, confident that the correct procedures are being followed.