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:
You need to take several actions to prepare for operating PAYE in real time, which are set out below. Decide which actions apply to your business - you can use the checklist provided to tick them off as you go.
Actions:
When: Now
Use this checklist to make sure you're ready. You can print it off and tick each action as you go.
Download 'Business Readiness Checklist' (PDF 241K)
You must have a Portable Document Format (PDF) viewer installed on your computer before you can use a PDF form. HMRC recommends that you use the latest version of Adobe Reader software that's compatible with your computer.
Download the latest version of Adobe Reader (Opens new window)
To be ready to report your payroll information each payday you must do one of the following:
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 options
Before you change to 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.
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 because:
Changes to PAYE Online for real time reporting
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
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.
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.
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.
Download the optional form Starter Checklist (PDF 742K)
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 or retires
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
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.
This field is for a four character reference that you will need when you submit a Full Payment Submission (FPS) and send your Bacs payment instruction. If you use a Bacs Approved Bureau (BAB) you should check with them now to make sure they will be able to supply the reference for this field on your submissions in time for your first FPS.
This reference (or hash) is needed so that HMRC can match the payments employees receive with the payroll data you report in real time. Each employee must have a unique reference and the reference must be in a format starting with '/' to show it is an RTI payment, and then have a further three characters.
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 change your payroll to 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 in the 2013-14 tax year, 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
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.
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 HMRC
Information you must get right when running your payroll
Download guidance on when you can report payroll a few days late (PDF 28K)
Until 5 October 2013, employers with fewer than 50 employees, who find it difficult to report every payment to employees at the time of payment, may send information to HMRC by the date of their regular payroll run but no later than the end of the tax month in which the payments are made (a tax month always ends on the 5th of a calendar month).
Relaxation of reporting arrangements for small businesses with fewer than 50 employees
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.
If you want another way to familiarise yourself with what you need to do to get ready, 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)
HMRC recommends that you watch the recorded online video (details above) first. Then, if you have questions, please join one of the live question and answer sessions. The live online sessions have a maximum capacity of 500 people for each session, but there are several sessions a day.
Before you start you need to check you have the right computer software and then register in advance.
PC users need: Windows® 8, Windows 7, Vista, XP, 2003 Server or 2000.
Macintosh users need: Mac OS® X 10.4.11 (Tiger®) or newer.
Registering is simple - you only need your name and email address to register.
View the available times and dates for live Q&A sessions
HMRC are hosting a series of face-to-face sessions across the country to give employers the chance to ask experts about RTI. These informal events are friendly and relaxed in style and have proven very popular with employers.
There are several sessions in each location, at various dates and times. Please call 0845 603 2691 to reserve a place on a session at a date and time that suits you.
Find out where and when these sessions will be held, and more about how to book.
