Since 6 April 2013 employers have been reporting PAYE information to HM Revenue & Customs (HMRC) in real time. You may see this referred to as Real Time Information - or RTI.
This means you must set up payroll records for the new tax year using payroll software, some of which is free. If you are a small employer you can use HMRC's Basic PAYE Tools, which is designed for employers with nine or fewer employees, to report payroll in real time.
If you use a manual payroll system, you will need to transfer this information on to payroll software to enable you to report your payroll information to HMRC electronically.
You need to keep these records up-to-date with any changes to tax codes, Income Tax and National Insurance contributions (NICs) rates.
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From 6 March 2014, you may be able to file a Full Payment Submission (FPS) or an Employer Payment Summary (EPS) to report PAYE information relating to payments for the tax year commencing 6 April 2014 (2014-15). If you want to do this, please ask your software provider whether they have included this functionality.
HMRC recognises that some small employers who pay employees weekly, or more frequently, but only process their payroll monthly may need longer to adapt to reporting PAYE information in real time. HMRC has therefore agreed a temporary relaxation of reporting arrangements for small businesses.
If you think you will benefit from this, see HMRC's guidance 'Relaxation of reporting arrangements for small businesses with fewer than 50 employees'.
You must set up payroll records for all employees you pay during the tax year. Your records must include all employees, no matter how much you pay them, even those earning below £111 per week (NICs Lower Earnings Limit 2014-15) or those paid just once a year.
You must include any employee who has left since 6 April but before you had chance to transfer their payroll records across.
If you are setting up a new payroll system, perhaps because you are transferring your payroll from a manual or in house system onto your software, please make sure you accurately transfer personnel details. It's important that the information you provide on payroll reports is accurate - if it's wrong it will cause you and HMRC problems, and your employees may be affected too.
If you are using commercial payroll software make sure you follow your software provider's guidance because it's important that the information you start the tax year with is accurate ready for your first report - if it's wrong it will cause you and HMRC problems, and your employees may be affected too.
If you use HMRC's Basic PAYE Tools there is step-by-step guidance, with screen shots, to help you switch your payroll records from Basic PAYE Tools 2012 to the Basic PAYE Tools - Real Time Information version for 2013-14.
As well as making sure you have RTI enabled software you need to update your payroll software to reflect rate changes that apply from 6 April 2014.
If you use commercial software your supplier sends you software updates for rate changes.
If you use (or are going to start using) HMRC's Basic PAYE Tools, the version you need can be downloaded using the link below.
After 6 April 2014, you must ensure that your payroll calculations for Income Tax and NICs are done using the 2014-15 rates and thresholds. The rates and thresholds for 2014-15 can be found by following the link below.
Most employers receive notices about tax code changes online instead of in the post. You receive email alerts each time HMRC sends you a new tax code.
You can access the tax codes that HMRC sends you online by either:
Your payroll software may let you read or process these notices directly.
PDV is an application you can download and install from the HMRC website. It's useful if you're expecting to receive lots of tax code and other notices from HMRC.
If you opted out of receiving tax code changes online then you will get them by post if there are any for your employees. You can always opt back into receiving them online.
Form P9X tells you about the tax codes you need to use from 6 April due to changes in Income Tax and NICs rates.
You use the code on form P9X, along with the employee's tax code from the previous tax year's payroll record, if HMRC hasn't sent you a new tax year code for that employee.
Form P9(T) tells you if an individual employee's tax code changes from 6 April. You won't get a P9(T) for each employee - only those you need to use a new code for.
Form P6 tells you if an individual employee's tax code changes after the start of the tax year.
If you receive an in-year tax code but it arrived too late for you to use in the last tax year, you can use the in-year tax code for the new tax year.
Form P7X tells you about changes to tax codes due to changes in Income Tax and NICs rates following the Budget.
You should contact HMRC to find out what tax code to use if you receive a tax code after the date you are required to use it from.
If you're using commercial payroll software or HMRC's Basic PAYE tools you follow the instructions on your tax code form to update employee records.