What is RTI in payroll? If you’re responsible for processing PAYE in your business, this guide will explain what RTI is and how to submit your payroll to HMRC using RTI reporting.
What is RTI in payroll?
RTI in payroll stands for Real Time Information– the process of submitting PAYE in real time. It is something all UK employers should be aware of, replacing the arduous and outdated accounting practice of submitting all of your payroll records at the end of the tax year.
What does RTI in payroll mean?
Processing your payroll using RTI means that you are submitting your employee’s PAYE records each pay cycle, instead of just once a year (as used to be the case).
You still calculate PAYE in the exact same way, making sure to deduct things such as National Insurance and Income Tax from your employees’ gross salaries, but instead of sharing the information with HMRC annually, you are submitting it every time your employees get paid.
Essentially, RTI is a more efficient way of submitting your PAYE records that can also help you to improve compliance. Rather than burden yourself with submitting a year’s worth of payroll in one sitting, the RTI system allows you to spread your PAYE submissions evenly across the tax year.
Payroll and RTI – complying with guidelines
Before we begin explaining how to use the RTI reporting method to manage your PAYE submissions, we need to talk about FPS (Full Payment Submission) and EPS (Employer Payment Summary).
These are the two main types of employee records you will need to submit to HMRC each pay cycle, when you are using the RTI.
What is a Full Payment Submission in payroll?
An FPS is a PAYE submission you must share with HMRC every time you pay your employees. Short for Full Payment Submission, an FPS offers a breakdown of each employees’ payments and deductions for that pay cycle.
What is an Employer Payment Summary (EPS)?
An EPS is an additional submission you will need to make to HMRC, if you have made any adjustments to the PAYE liability for the pay cycle. As with an FPS, EPS submissions are also processed through the RTI payroll system.
Occasions in which an EPS will be needed to be submitted alongside an FPS include:
- Making a reclaim for statutory maternity, paternity, adoption, parental bereavement, or shared parental payments
- Claiming Employment Allowance (only one claim is permitted each tax year)
- Reclaiming Construction Industry Scheme deductions if you are a Limited Company
- Adjustments for PAYE funding
- Paying the Apprenticeship Levy (application if your annual bill totals more than £3 million)
RTI and tax year end
Even when using the RTI payroll system to send your PAYE submission to HMRC each pay cycle, you still need to make an end of year tax submission.
The good news is this can also be submitted using RTI. And, because you’ve been sharing PAYE details for each of your employees throughout the year already, your end of year submission will be quick and easy to generate. You would simply mark your last FPS or EPS of the tax year as ‘final’ before submitting to HMRC.
RTI compliance – how to avoid penalties from HMRC
If you submit an FPS late or fail to submit an EPS when one is needed, you could incur a penalty from HMRC. To avoid paying a fine, make sure you submit your RTI submissions on or before every payday.
If you don’t have access to RTI software you can hand over responsibility for your PAYE and RTI submissions to a third-party payroll service, such as HWB, to manage on your behalf. Just make sure that whoever you appoint is a reputable payroll service provider, as any late or incomplete submissions made on your behalf can still earn you a penalty from HMRC.
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