Businessman eating takeout at desk | Real Time Information: What is RTI?

Contents

  1. 1. What is Real Time Information (RTI)?
  2. 2. Why was RTI introduced?
  3. 3. Types of RTI submission
  4. 4. Real Time Information and National Insurance
  5. 5. How to report RTI
  6. 6. Why payroll data matters for RTI
  7. 7. RTI and late filing penalties
  8. 8. Managing temporary or casual employees with RTI

Real Time Information: What is RTI?

March 8, 2023
Whether you’re a self-employed sole trader or limited company, there’s a chance you’ll start out alone — but, as your small business grows, you might consider taking on on extra staff.Whether you employ one person or fifty, Real Time Information for payroll is key when it comes to managing employee salaries.Not only will it help you to stay on top of compliance, but it will also ensure your employees pay the right amount of tax.Read on to learn more about the meaning of Real Time Information, how HMRC RTI works and, as well as your responsibilities as an employer.

What is Real Time Information (RTI)?

Real Time Information, or RTI, requires employers and pension providers to send information to HM Revenue and Customs (HMRC) immediately, instead of waiting until the end of the tax year.Prior to its introduction in 2013, employers would send forms P14 and P35 to HMRC every year, detailing who was employed, how much they’d earned and how much Income Tax and National Insurance they’d paid. They’d also need to independently send P45s and P46s whenever an employee would start or leave a job.With the new RTI process in place, employers can now send information on an employee’s tax contributions and other deductions to HMRC every time they run payroll under Pay As You Earn (PAYE), either on or before the pay date.

Why was RTI introduced?

The introduction of RTI payroll made the reporting of payroll information to HMRC much simpler. Under the old system, employers had to fill out an extensive and complicated tax return on an annual basis.To make payday easier for employers, a new system was introduced to:
    Reduce the administrative burden on employersUpdating PAYE information in real-time, as opposed to once a year
As well as saving businesses time, the new RTI system was expected to save businesses an estimated £300 million in administration costs.

Types of RTI submission

As an employer, there are two types of RTI submissions you need to make: a Full Payment Submission (FPS) and an Employer Payment Summary (EPS).

Full Payment Submission

If you’re a UK employer, you’ll need to register as an employer with HMRC and submit your payroll information online for each pay cycle.

An FPS provides HMRC with information about your employees, the tax they need to pay and how much tax you owe to HMRC. You should submit your FPS on or before the date your employees’ salaries are paid.HMRC will then use this information to calculate how much Income Tax and National Insurance contributions (NICs) you owe each tax month.

What information is included in an FPS submission?

An FPS contains the following information:
    Personal information for each employee, such as name, address, National Insurance number and tax codeSalary information for each employeeIncome Tax and National Insurance contributions for each employee, as well as the total owed by the employerInformation for new starters and leavers

Employer Payment Summary

An Employer Payment Summary, or EPS, is only submitted when you need to report values to HMRC that you can’t include on the Full Payment Submission. These values will have an impact on the payments you make to HMRC on a monthly or quarterly basis.
GOV.UK advises you should submit an EPS alongside an FPS in the following circumstances:

    To reclaim statutory payments, such as statutory maternity, paternity, adoption, parental bereavement or shared parental payments – even if you received an advance payment from HMRC to cover them To claim Employment Allowance (one claim per tax year) To reclaim Construction Industry Scheme (CIS) deductions as a limited company To claim National Insurance contributions holidays for previous tax years To pay the Apprenticeship Levy if you, or any employers you’re connected to, have an annual salary bill of more than £3 million
If you haven’t made any payments during a tax month, you’ll need to tell this to HMRC by submitting an EPS.

Real Time Information and National Insurance

You can also use RTI to submit a National Insurance Verification Request (or NVR for short). You can use this to obtain or validate a National Insurance number for your employees.

Once you’ve submitted your NVR, you’ll be able to view the HMRC response through your HMRC PAYE Online account. HMRC will confirm if the number is correct or not, or provide you with a National Insurance number if you don’t have one for your employee.

How to report RTI

To report RTI, you’ll need to outsource your payroll system to an accountant, a payroll software provider, or a combination of the two (such as Ember).

If you need to submit an EPS and your chosen system doesn’t allow you to, you can use HMRC’s PAYE Basic Tools — but to save you from the stress, we can assure you Ember does it all for you.

Why payroll data matters for RTI

Accurate payroll data is key when it comes to RTI, as the information you submit each time you pay your employees is checked against the data stored by HMRC.If the records you submit don’t match the information stored by HMRC, you could end up with incorrect tax calculations or being subjected to compliance checks.To avoid this, you should always check you have the correct details for your employers. It’s a good idea to double-check this against official documents, such as:
    HMRC and/or DWP documentationPassportBirth certificate

RTI and late filing penalties

If you fail to submit your FPS on time, don’t send the expected number of FPS files or don’t submit an EPS if you didn’t pay any employees in a tax month, HMRC will impose a penalty.How much your business will pay in penalties will depend on how many employees you have:
    1 to 9 employees: £10010 to 49 employees: £20050 to 249 employees: £300250 or more employees: £400
Note: Even if you outsource your payroll, the submission of RTI is still your responsibility. To try and avoid any penalties, it’s worth asking your provider how they comply with RTI so you can ensure you have the right processes in place for your business.

Managing temporary or casual employees with RTI

As your business grows, you may decide to take on temporary or casual staff. For RTI purposes, you need to include them on your payroll and submit information to HMRC each time they’re paid.
To inform HMRC of any new seasonal or temporary member of staff, you’ll need a P45 from any previous employment they’ve undertaken, or fill out a Starter Checklist.

Caroline Wire
Caroline WireFreelance Copywriter

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