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.
Get/update your software or use a payroll provider
To be ready to report your payroll information each payday you must
do one of the following:
- get payroll software if you don't already have any (some packages
- update your existing payroll software to a version with this
functionality (your provider can advise on this)
- use a payroll provider (such as an accountant or payroll bureau)
to do the reporting for you
For help in picking a solution that suits your circumstances, read
the guidance on choosing a payroll option for real time PAYE.
Software packages and other payroll
If you already use payroll software, or a provider, and are changing from one to another it's important you follow certain steps to avoid creating what HMRC calls 'duplicate employments' - follow the link above and read the section called 'Changing payroll software'.
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
Check you are registered for PAYE Online
You are probably already registered for PAYE Online and have a user
ID and password for PAYE Online - if so, you can skip this step.
But if you're not registered yet, and you're responsible for your
own payroll reporting, then you will need to register for PAYE Online
- PAYE Online is how you may still send certain forms to HMRC
- if an employee tax code changes, PAYE Online is one of the ways
HMRC will tell you
- to send your payroll reports to HMRC, your software will need
your PAYE login details
Changes to PAYE Online for real
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.
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.
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
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.
optional form Starter Checklist
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
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
Action if you pay your employees via Bacs
If you pay your employees directly into their bank accounts via
the Bacs system (Bacs is not the same as internet banking) using
your own Service User Number (SUN) you must check
that your payroll software includes the RTI (Real Time Information)
cross-reference (sometimes called a 'hash') field.
If you pay without using your own SUN you will
not need the hash reference even if you pay via Bacs.
More information about the cross reference (hash) field
This reference (or hash) is needed so that HMRC can match the payments
employees receive with the payroll data you report in real time.
If you need to know more, follow the link below to 'Real Time Information
Real Time Information and
Bacs (PDF 55K)
Be ready to update HMRC with your latest payroll
When: At or before the time you send your first report
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
Start reporting your payroll information
When: HMRC invited a number of employers to participate
in a pilot during 2012-13. But most employers started to
operate their payroll in real time in April 2013.
The date you should start sending your PAYE information in real
time is on the letter HMRC sent you. You cannot send any real time
information reports until this date. If you do they will be rejected.
Once you've followed all the previous steps, you'll be in a position
to start reporting your payroll information.
Reporting your payroll information
You'll need to report your payroll information electronically, on
or before any day when you pay someone. This will normally be carried
out by your payroll software (or your payroll provider) at the same
time that the payments are calculated, or just afterwards.
So you'll have to review the processes throughout your organisation,
to check that you'll have the information you need to record and
report it, on time - whether weekly or monthly.
It's important that the information you provide on these reports
is right - if it's wrong it will cause you and HMRC problems, and
your employees might be affected too.
Sending payroll information to
Information you must
get right when running your payroll
Download Exceptions to reporting PAYE information 'on or before' paying an employee (PDF 27K)
Temporary relaxation of reporting arrangements for
HMRC has announced that existing employers with nine or fewer
employees, who need more time to adapt, can report PAYE information
on or before the last payday in the month until April
2016. This means that micro employers who are still
finding it difficult to report PAYE information on or before
the date they pay their employees will have more time to adapt
their arrangements so that their business is ready for full
real time reporting from April 2016.
The change is narrower than the relaxation which ended on 5 April 2014, this new relaxation will only apply to existing employers with nine or fewer employees. All new employers, as well as existing employers with 10 or more employees, must report PAYE information in real time. Follow the link below to read about the relaxation which runs until 5 April 2016.
This support for existing micro employers will mean micro
businesses and their agents have up to a further two years
to change their processes and their arrangements to enable
them to adapt to reporting in real time. HMRC recommends employers
change their processes as soon as they can to ensure they're
ready, in time for April 2016, when all employers must report
PAYE information each time they pay their employees.
Download 'PAYE: A relaxation to the reporting arrangements for micro employers (9 or fewer employees)' (PDF 40K)
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
It's simple to view - it’s hosted on the HMRC YouTube channel.
to the 'Get ready to operate PAYE in real time' video (Opens new
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.
to the 'Real Time Information' video (Opens new window)