Changes in real time

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There are several changes taking place in the near future which will affect employers.

These changes include the introduction of the new PAYE Real Time Information (RTI) system by HMRC and the pension auto-enrolment requirements.

Whilst, following the introduction of RTI, the fundamentals of PAYE will remain the same in that employers will continue to operate PAYE codes and deduct tax and national insurance, RTI will change how and when employers and pension providers report information to HMRC.

Under the current PAYE system, employers tell HMRC what deductions they have made from employees’ pay after the end of the tax year, using form P35. However, under RTI employers will report tax and national insurance deductions when, or before, payments are made. Employers will therefore be required to provide information to HMRC for PAYE, national insurance and Student Loans at the point payment is made to the employee or beforehand.

It is hoped the new RTI system will ensure that the correct deductions are made from pay, and result in more employees paying the right amount of tax and national insurance in the tax year.

‘RTI will ensure that the PAYE system meets the needs of the 21st century,’ said David Gauke, the exchequer secretary to the Treasury. ‘It will improve the service to taxpayers by making it easier to ensure that people pay the right tax after a change of job.’ He continued: ‘RTI will remove administrative burdens of £300m a year from employers, mainly from the abolition of the end-of-year PAYE returns process – the biggest single contribution that any tax change could make.’

The first tranche of employers began testing the new RTI system in April 2012 under HMRC’s pilot scheme. Subject to successful completion of the pilot, large businesses will be required to start using RTI from April 2013. All businesses will be expected to use the new system from October 2013.

The new legislation covering pension auto-enrolment stipulates that employers must automatically enrol all eligible employees into a qualifying pension scheme and pay a minimum contribution into the fund. The new duties are being phased in from 1 October 2012, starting with the largest organisations. All existing employers will be required to comply with the regulations by 2017.

Our payroll department can provide support in maintaining wages records and we can provide support to businesses on meeting regulatory requirements. If you require further information please telephone Mairi Drummond on 01573 224391 or email