What Is A Real-Time Information (RTI) System?

Ensuring accurate income tax and National Insurance collection is a pivotal responsibility of employers in the UK. Traditionally, HMRC mandated monthly submissions of these tax payments, followed by annual reports. However, from April 2014 onwards, HMRC unveiled the Real-Time Information System (RTI), marking a significant shift in how the payroll process and tax collection has worked ever since.

Curious? Let’s take a closer look at the RTI system to gain a comprehensive understanding of how it works.

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What Is A Real-Time Information (RTI) System?

Previously, HMRC required employers to submit tax payments monthly and report these figures annually using Forms P35 and P14. However, HMRC revamped this process, transitioning to real-time reporting through the introduction of the Real-Time Information System (RTI), a new system of real-time reporting for employers.

Under RTI, employers transmit information about tax and deductions under the PAYE system to HMRC each time an employee is paid, unlike the previous practice of year-end reporting with P35 and P14 forms. This shift took effect in April 2014 wherein all employers began to report in real time, providing HMRC with more up-to-date data.

What Does The RTI System Report?

The introduction of the RTI system was aimed at enabling employers to submit current payroll information to HMRC as employees were receiving their pay. While it would indeed be ideal to retain the entirety of one’s earnings, unfortunately, this isn’t the case in the UK, where employees receive paychecks with deductions for taxes.

Every UK employee is obligated to contribute to income tax and National Insurance (NI). Additionally, there might be other deductions, such as student loan repayments. The amount an employee receives after these statutory deductions are subtracted is what is known as their net pay.

All these details are encompassed within the employee payroll, and this is what will be subsequently reported to HMRC via the RTI system.

How Does Real-Time Information (RTI) Work?

The responsibility lies with the employer to submit employee payroll information to HMRC. This involves reporting the employee’s pay, any payrolled benefits, and deductions through a Full Payment Submission (FPS) on or before the designated payday.

Additionally, employers are required to submit an Employer Payment Summary (EPS) by the 19th of the subsequent tax month. This enables HMRC to apply any adjustments, such as statutory pay, to the amounts owed from the FPS.

In both EPS and FPS submissions, employers must provide details including the first part of their HMRC office number or employer PAYE reference, their accounts office reference, and the relevant tax year.

All this information can be easily transmitted electronically to HMRC. HMRC can then utilise this data to update individual tax records in real-time, ensuring precision and minimising the likelihood of errors or discrepancies.

Can I Resubmit RTI to HMRC?

If you’ve made a mistake on either your FPS or EPS, there’s no need to panic. It may be the case that you enter the wrong pay or deductions, payment dates, employee information, start or leaving dates for your employees, and so on – HMRC understands that mistakes can be made.

Nevertheless, it’s essential to note that resubmitting any form of RTI return isn’t possible. Should an error arise, the most typical way to solve the problem is by correcting it in your next FPS. For example, if you’ve noted down incorrect employee personal information, simply correct it in your next FPS submission with the accurate details.

The UK government website outlines methods for addressing mistakes in your RTI submission. Whether it’s rectifying an incorrect payment date or amending reported deductions, HMRC offers a range of options to rectify these errors. Be sure to thoroughly read the guidance provided to ensure you have all the necessary information to correct your specific mistake.

However, it’s important to reemphasise that rectification is never accomplished by resubmitting an RTI; rather, it involves subsequently sending HMRC the correct information.

What Are The Key Benefits of Real-Time Information (RTI)?

RTI systems such as the one implemented by HMRC play a crucial role in modernising and enhancing the efficiency of tax administration and payroll reporting. Let’s take a deeper dive into the key benefits of the part RTI plays in payroll:

  • Accurate Information: Perhaps the most obvious benefit of real-time reporting is that it reduces the likelihood of errors. This subsequently ensures HMRC has the most up-to-date information, leading to more accurate tax calculations and contributions.
  • Employee Monitoring: As opposed to submitting information at the end of the tax year, monthly submissions to HMRC allow employers to have better visibility into their payroll data, allowing them to monitor trends, identify discrepancies, and make informed decisions regarding staffing, budgeting, and resource allocation.
  • Streamlined Processing: By electronically submitting employee information via RTI systems, employers can streamline the process, saving themselves time and resources. Employers no longer need to wait until the end of the tax year to report payroll information, leading to improved efficiency in tax administration.
  • Compliance: RTI helps ensure compliance with tax regulations by providing accurate reporting of payroll information, reducing the risk of non-compliance penalties and fostering a culture of transparency and accountability.