A revolutionary update to the way the earnings and taxation of the majority of the UK's working population is reporting is less than two months away.
RTI is taking over from the 70 year old system of sending an annual reporting of an employee's income and taxation record via PAYE.
From the 6th April 2013, employers will be sending a report to HMRC of an employee's income and tax each time the employee is paid. Payroll systems would need to be updated to calculate this information as part of the payslip generation and submit it electronically to HMRC.
The updates will not change how or when people get paid, nor when employers are to pay the collected tax and NIC payments, but will replace the annual submission of forms P14 and P35 with:
- Submitting an FPS at each pay cycle.
- Submitting a monthly Employer Payment Summary - in order to make adjustments to amounts owed.
Whilst most employers are expected to have their own software upgraded, or the payroll companies used are to use new software, employers with nine or fewer employees can use a free tool from HMRC (Basic PAYE Tools).
A transitional period of one year will start from April to phase in the adoption, which is expected to be standard by April 2014.