Most people get confused in fully understanding PAYE RTI. The understanding of the new system after 2013 is easy. We will define it to you in the most simple terms.
Paying your employees on time is a big task. You have to report their payments to the tax body in real-time. This is known as Real Time Information (RTI) or Paye RTI system. This system greatly simplified things in a way.
HMRC reformed the PAYE tax reporting in 2013. The payment reporting got trouble-free after the reform. The systematic reporting system enables everyone to keep track of monthly and quarterly payments.
What is PAYE?
If you pay attention to your payslip you will see deductions made from your earnings. This may not bother you if you are getting a fat paycheck from your company, but these payments are going to the HMRC via the real-time PAYE system. Your employer deducts taxes like National Insurance Contributions from your pay every month.
What is RTI?
RTI means Real-Time Information that you provide to the tax body. Previously employers used to pay NIC and tax to HMRC at the end of the tax year. Ever since the system transformed, you have to report payments to the tax body in real-time.
Every time when you run Payroll software, you have to submit payroll information to HMRC. This will show the deduction from the pays of your employees.
RTI system provides HMRC other information as well. For example, they will count your daily working hours. This information then used to determine whether you are qualifying for universal credits or not. Universal credits is a payment to help you manage your living costs whenever you get in bad shape in terms of low income or get out of work.
Do I get notified about any changes in the tax code?
The PAYE RTI system technically makes things easy for you. You don’t have to fill out a long-format the end of the year for payroll while you are already busy making other tax calculations. People back in the day did not have any access to the changes in tax codes.
With RTI, HMRC will let you know about any changes in your tax codes. You will not remain in the dark anymore. HMRC will keep an eye on your tax codes.
HMRC’s smart system make employers more aware
If you are paying your employees on time then it means you are making all parties happy. But if you make delays or you somehow owe PAYE to HMRC then they will know it immediately. If you fall behind or make an error you will be notified. The system will simply stop you from making any errors. This will keep you away from any trouble the tax year while you prepare your annual accounts.