Since 6 April 2013 employers have been 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 you must set up payroll records for the new tax year using payroll software. If you are a small employer you can use HMRC's Basic PAYE Tools, which is designed for employers with nine or fewer employees, to report payroll in real time.
You can't use a manual payroll system, because you need to report your payroll information to HMRC electronically.
You need to keep these records up-to-date with any changes to tax codes, Income Tax and National Insurance contributions (NICs) rates.
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If you sent PAYE information in real time before 06.00 on 6 April 2013 your submission will be rejected - the only exceptions are for those employers who took part in the RTI pilot during 2012-13.
HMRC will closely manage online reports for PAYE in real time for the first few weeks. Look at the 'Service availability' pages for up to date information about any delays in response times and see the 'Troubleshooting' section to help solve any problems you come across.
HMRC recognises that some small employers who pay employees weekly, or more frequently, but only process their payroll monthly may need longer to adapt to reporting PAYE information in real time. HMRC has therefore agreed a relaxation of reporting arrangements for small businesses.
If you think you will benefit from this, see HMRC's guidance 'Relaxation of reporting arrangements for small businesses with fewer than 50 employees'.
Relaxation of reporting arrangements for small businesses with fewer than 50 employees
You must set up payroll records for all employees you pay during the tax year. Your records must include all employees, no matter how much you pay them, even those earning below £109 per week (NICs Lower Earnings Limit 2013-14) or those paid just once a year.
You must include any employee who has left since 6 April but before you had chance to transfer their payroll records across.
If you are setting up a new payroll system, perhaps because you are transferring your payroll from a manual or in house system onto your RTI enabled software, please make sure you accurately transfer personnel details. It's important that the information you provide on payroll reports is accurate when you send your first report in real time - if it's wrong it will cause you and HMRC problems, and your employees may be affected too.
A summary of the payroll information you need to include is in the guide 'Preparing to operate PAYE in real time'.
Preparing to operate PAYE in real time
If you are using commercial payroll software make sure you follow your software provider's guidance because it's important that the information you start the tax year with is accurate ready for your first report - if it's wrong it will cause you and HMRC problems, and your employees may be affected too.
If you use HMRC's Basic PAYE Tools there is step-by-step guidance, with screen shots, to help you switch your payroll records from Basic PAYE Tools 2012 to the Basic PAYE Tools - Real Time Information version for 2013-2014.
Download 'Existing users: switching to Basic PAYE Tools (RTI)' (PDF 2.4MB)
Operating PAYE in real time using payroll software means your software generates the report once you've run your payroll. In most cases the first report you send will be a Full Payment Submission. But larger employers, those with more than 250 employees, send a different first report, an Employer Alignment Submission.
There's guidance on which report you must send first and when you should send it - including examples - in the guide 'First report - checking your payroll records match with HMRC's' - you'll find a link at the end of this section.
If your first payroll run for 2013-14 was on or around 6 April you need to make sure you submit your report to HMRC at the right time. Follow the link below to examples of payrolls run on or around 6 April that will tell you when you must make a real time return to HMRC.
First report - checking your payroll records match with HMRC's
Examples of payrolls run around the 6 April 2013
As well as making sure you have RTI enabled software you need to update your payroll software to reflect rate changes that apply from 6 April 2013.
If you use commercial software your supplier sends you software updates for rate changes.
If you use (or are going to start using) HMRC's Basic PAYE Tools - Real Time Information for 2013-14, the version you need can be downloaded using the link below.
After 6 April 2013, you must ensure that your payroll calculations for Income Tax and NICs are done using the 2013-14 rates and thresholds. The rates and thresholds for 2013-14 can be found by following the link below.
Rates and thresholds for employers 2013-14
Most employers receive notices about tax code changes online instead of in the post. You receive email alerts each time HMRC sends you a new tax code.
You can access the tax codes that HMRC sends you online by either:
PDV is an application you can download and install from the HMRC website. It's useful if you're expecting to receive lots of tax code and other notices from HMRC.
Using HMRC's PAYE Desktop Viewer
If you opted out of receiving tax code changes online then you will get them by post if there are any for your employees. You can always opt back into receiving them online.
Form P9X tells you about the tax codes you need to use from 6 April due to changes in Income Tax and NICs rates.
You use the code on form P9X, along with the employee's tax code from the previous tax year's payroll record, if HMRC hasn't sent you a new tax year code for that employee.
Form P9X - Tax codes to use from 6 April 2013
Form P9(T) tells you if an individual employee's tax code changes from 6 April. You won't get a P9(T) for each employee - only those you need to use a new code for.
Form P6 tells you if an individual employee's tax code changes after the start of the tax year.
If you receive an in-year tax code but it arrived too late for you to use in the last tax year, you can use the in-year tax code for the new tax year.
Form P7X tells you about changes to tax codes due to changes in Income Tax and NICs rates following the Budget. There are no changes to the rates announced for 2013-14.
You should contact HMRC to find out what tax code to use if you receive a tax code after the date you are required to use it from.
If you're using commercial payroll software or HMRC's Basic PAYE tools you follow the instructions on your tax code form to update employee records.
