Preparing to operate PAYE in real time

From 6 April 2013 employers started reporting PAYE information to HM Revenue & Customs (HMRC) in real time. You may see this referred to as Real Time Information - or RTI.

This means that employers (or their accountant, bookkeeper or payroll bureau) have to:

  • send details to HMRC every time they pay an employee, at the time they pay them
  • use payroll software to send this information electronically as part of their routine payroll process

You need to take several actions to prepare for operating PAYE in real time, which are set out below.

Actions:

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Check employee data is complete

Before you start reporting PAYE in real time it's important that the data you hold in your payroll records is complete and accurate. You must check and, if necessary, update the data for all your employees or pensioners - certain details are essential such as name, date of birth and National Insurance number, and must be in full and be correct.

Getting your payroll data right first time

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Include new information in your payroll records

When you report your payroll information in real time, you will need to send certain information that you may not already keep on your payroll system. So you'll need to inform your staff and change your processes to collect this new information - although you may not be able to include it in your payroll records until your payroll software is compatible.

Hours worked

Information will be needed about approximately how many hours your employees normally work in a week.

Notifying and getting new employee information right

Lower paid, temporary, irregular and casual staff

You'll need to report payments to all staff no matter how much you pay them, even those earning below the Lower Earnings Limit or those paid just once a year. So you'll have to enter details of these employees onto your payroll system. Be sure to get their employment status right.

If appropriate, set the irregular payment pattern indicator so HMRC doesn't assume that they've left your employment just because they haven't worked for a while.

Temporary or agency workers

Recording changes to employee working patterns

As well as recording additional information when you first take a new employee on, you may need to make changes to an employee's payroll record in certain circumstances.

For example, if an employee takes unpaid leave you need to set an irregular payment indicator when you make their final payment for that period or HMRC will assume that they've left your employment.

Employee changes and events

New starters

You won't report new starters to HMRC separately any more. Their information will be automatically sent when you report your payroll information. So you'll need to have processes ready to collect and record the correct personal information from new starters. This information can be gathered and stored however you prefer - letter, email or a form. HMRC has a Starter Checklist you can use but this form, or any other records you keep, must not be sent to HMRC. You must keep your records for the current year and the three previous tax years.

Find optional form Starter Checklist

Leavers

You won't report leavers separately any more. You must continue to provide a form P45 to employees who leave - but don't report the P45 part 1 information to HMRC using PAYE Online for employers any more. Instead, set their leaving date on their payroll record so it will be automatically reported next time you send your payroll information.

When an employee leaves, retires or is made redundant

Contingency plans

Have contingency plans ready in case of computer and/or other failures or problems, such as a loss of your internet connection. There's no facility to make your payroll reports via email, or by filling in a form on a web page. But you can send in your reports in advance of the actual payday.

What happens if you don't report payroll information on time

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Be ready to update HMRC with your latest payroll data

When: At or before the time you send your first report to HMRC.

To make your first PAYE real time payroll report successful, the data that HMRC holds on your employees must match your payroll data. When you operate PAYE in real time you'll need to send HMRC information about every employee who's worked for you in the current tax year, even if they've already left your employment. So when you start reporting payroll information in real time you should have new software and procedures in place before you pay anyone - so that all the necessary information is stored in your payroll system ready to be reported.

First report - checking your payroll records match with HMRC's

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Know where to go for extra help

When: Now and at regular intervals.

Any important news relating to PAYE and payroll operation is published on HMRC's Employer PAYE news and updates page. There are typically at least a couple of items published every month, so checking on it as part of your monthly routine is a good idea.

Employer PAYE news

HMRC have produced a best practice guide providing some scenarios which have helped other employers or agents to start reporting 'on or before' paying an employee.

Download Best practice guide for reporting PAYE information 'on or before' paying an employee (PDF 70K)

YouTube (a video sharing website)

If you want another way to familiarise yourself with what you need to get started, you might want to look at HMRC's video 'Get ready to operate PAYE in real time'. It's available to view anytime that suits you. The video covers all the same tasks as this guidance and will help you to prepare for reporting PAYE information to HMRC in real time.

It's simple to view - it’s hosted on the HMRC YouTube channel.

Go to the 'Get ready to operate PAYE in real time' video (Opens new window)

Also on HMRC's YouTube channel, you can watch a short overview (lasting about 10 minutes) of the main changes you'll see as an employer.

Go to the 'Real Time Information' video (Opens new window)

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