What is RTI in Payroll? Everything You Need To Know

Payroll is the system of calculating and distributing the due salaries to your employees. Now, reporting payroll to HMRC is also crucial to accurately fulfil the tax obligations. It is the juncture you should ask what is Real Time Information (RTI) in payroll. In April 2022, HMRC introduced the Real-Time Information (RTI), wherein it amended the PAYE regulations 2003 with the aim of reporting the income tax in real-time. RTI is a payroll reporting system to ensure accurate and timely reporting of employees’ tax and NICs.

Moreover, for the 2024/25 tax year, RTI remains an essential requirement for all UK employers in order to keep tax records up-to-date and ensure employees pay the correct income tax and NICs throughout the year. Therefore, this blog elaborates on what RTI is in payroll, including how it works, what its types are, and why it is important for both employers and employees.

 

 

What is RTI in Payroll?

There was a time when employers in the UK had to deal with the fuss of ensuring all their payroll submissions were accurate and on time when the tax year ended. However, with the introduction of Real Time Information (RTI) in payroll, the hassle of submitting everything at the year’s end has been eliminated since RTI allows employers to submit all their PAYE in real-time. At its core, Real Time Information (RTI) in payroll is an improved system of reporting that HMRC established to make PAYE submissions more efficient.

To go into detail, under RTI, an employer can viably transmit the information about income tax deductions and NICs under the PAYE system to HMRC every time an employee is paid. It is noteworthy that RTI does not change how you calculate PAYE. Instead, it just enables you to submit crucial tax information to the HMRC in real-time. Ultimately, the RTI system requires an employer to submit PAYE information every time they pay their employees instead of doing it once a year, as was previously needed.

In addition, implemented in April 2013, RTI replaced the previous method of submitting payroll information annually using P35 and P14 forms. It implies that employers who use RTI no longer need to submit information to HMRC via Forms P35 and P14 after the tax year ends, nor are they required to send P45 or P46 forms to HMRC when employees join or depart from a job.

To learn more about a P45 form, read our guide:

• What is P45 form and why is it important in the UK?

What is The Purpose And Importance Of RTI in Payroll?

Before RTI  was launched, businesses only reported payroll information once a year, which mostly led to deferments or delays in tax updates, incorrect benefits claims, and increased administrative burdens for employers. The prime objective of RTI is to improve the efficiency of tax collection and curb tax evasion since it requires employers to report salaries, income tax, and other deductions every time they pay an employee instead of compensating them at the end of the tax year. Further down the line, the aim of the RTI system is to:

• Enhance the accuracy of submissions of employees’ income tax and NICs.
• Reduce the risk of underpayments and overpayments of tax.
• Contain tax evasion.
• Support the Universal Credit system by providing real-time data on earnings.
• Simplify payroll administration for employers.

How Does RTI in Payroll Work?

Knowing the dynamics of the RTI system is a crucial aspect of learning what is RTI in payroll. The following steps highlight how RTI works in payroll:

To take a detailed look at payroll, go through our blog:

• What is payroll?

Register With HMRC As An Employer:

Before using RTI, businesses must be registered as an employer with HMRC and set up a PAYE (Pay As You Earn) scheme. It is being pointed out here it stands applicable to all businesses that employ staff, be it full-time, part-time, or temporary.

Use Payroll Software:

To accurately process wages and submit payroll data, it is compulsory that employers use RTI-compliant payroll software. Otherwise, a payroll accountant can adeptly use commercial payroll software,  such as Xero, Sage, or QuickBooks to ensure up-to-snuff payroll processing.

Submit Full Payment Submission (FPS) To HMRC:

Whenever an employer makes income tax, NICs and other necessary payroll deductions from their employees’ salaries, it is mandatory to inform HMRC of their employees’ Full Payment Submissions (FPS). Notably, this is the prime and most common submission.

Each time employees are paid, employers must send a Full Payment Submission (FPS) to HMRC. FPS includes the details such as:

• Employee salaries or wages.
• Income tax and NICs deductions.
• Any other deductions (e.g., student loans, pensions).
• Employee start and leave dates, if applicable.

Lastly, an employer must submit an FPS every time they pay the salary to an employee. This submission must be paid before or on the day that the employee gets paid.

Submit Employer Payment Summary (EPS):

As mentioned before, employers must submit payroll information to HMRC electronically every time they make a payment to an employee. While typically, it is done through Full Payment Submissions (FPS),  in some cases, an Employer Payment Summary (EPS) is used to serve the purpose. For greater clarity, an Employer Payment Summary (EPS) must be sent to HMRC if employees were paid in a tax period or adjustments are required, such as claiming employment allowances.

Moreover, an employer will use the (EPS) to report:

• Statutory Payments recovered.
• NIC Compensation for Statutory Payments.
• CIS deductions.
• Deductions an employer can rightfully make under the Regional Employer NICs Holiday for new businesses.
• Details of any advances obtained from HMRC.

Pay The Deductions To HMRC:

Eventually, employers will submit their PAYE bill, under which they will pay the correct tax and NICs to HMRC by the 22nd of the following month if they pay monthly (or the 19th if paying by cheque). Alternatively, the PAYE bill can also be submitted on the 22nd after the end of the quarter if you pay on a quarterly basis. Failure to pay on time may result in penalties.

 

 

Conclusion:

All in all, comprehending what is RTI in payroll is an essential HMRC reporting system that helps businesses report employee earnings accurately and timely. With the help of an RTI system, both employers and employees can benefit from it, creating a more efficient payroll and tax collection process throughout the tax year. Moreover, if employers opt to outsource their payroll to a payroll accountant, they can ensure your business remains RTI compliant. How so? Certified and proficient accountants are available at payrollservices.accountants use RTI-compliant payroll software, meet submission deadlines on your behalf, and keep accurate records so you can avoid penalties and ensure compliance for the 2025 tax year.

Thus, you can make your payroll processing a breeze by outsourcing it to our payroll accountants while you focus on other crucial business responsibilities.

Disclaimer: Please note that the information provided in this blog is exclusively for informational purposes and should not be considered financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.