With just one month to go until the start of the biggest shakeup of the Pay As You Earn (PAYE) system in nearly 70 years, HM Revenue and Customs (HMRC) is urging employers to get ready.
From 6 April, employers will be required to move to a new way of reporting PAYE called Real Time Information (RTI), where they report each time they pay employees, rather than annually. This will give firms less flexibility in their payment of PAYE but by collecting the tax throughout the year will increase the money in the Government's coffers so it can reduce borrowing – or so it hopes.
HMRC prefer to tell businesses that the new system will benefit them through simpler requirements for reporting and the abolition of the extensive annual tax return that the old system required.
For employees, particularly the 1million people in the UK with more than one job, RTI will bring benefits as HMRC starts to get details of their tax every time their wages are paid, rather than just once a year. This will make HMRC’s records more accurate and up-to-date and will begin to reduce the number of cases where someone is found to have under or overpaid tax during the year.
Ruth Owen, HMRC’s Director General Personal Tax, says: “Real Time Information will be better for employers, better for employees and better for Britain. This is the biggest revolution in PAYE in around 70 years and over time will reduce the costs of administration for businesses.
“Employers can find all the information they need about the new system on HMRC’s website and small businesses can download free software to help them get ready. So whatever the size of your business, wherever you are based, whatever you do – if you employ people, it’s time to get ready.”
For the vast majority of employers, the first real time return will be the first employee payday on or after 6 April. In order to make sure you are ready for RTI if you employ people you should follow these three simple steps:- Go to HMRC’s website – www.hmrc.gov.uk/rti – for comprehensive information about RTI, including how to prepare, payroll software options and tips
- Acquire new or updated software. Employers will need to talk to their payroll software provider or payroll service-provider (and their Bacs software or solution supplier if they pay via Bacs)
- Start checking and updating employee information. It is vital that the information employers have about their employees is up to date.
HMRC is offering a range of help for businesses to prepare for the change, including free software for employers with nine employees or less, targeted flyers and emails, regular live Twitter Q&As, YouTube videos and roadshows across the country.
HMRC has said it will be lenient for the first year while firms get used to the new system but it expects the change to be made and will be keeping a close eye on companies that fail to comply.