It’s all change for PAYE – are you prepared?

If you are an employer, or self-employed with a limited company, then from the 6th April 2013 the HMRC are introducing a new way of reporting on PAYE which creates some significant changes to the way you do your payroll.

What are the changes?

The main change is the introduction of Real Time Information (RTI) reporting. This means that you will now have to send PAYE information for all employees every time you pay them. You will also need to use payroll software that will send this PAYE information to HMRC as part of your routine payroll process.

How is this different?

1. At the moment you only have to report your PAYE at the end of the year, as opposed to every time you pay an employee. This means that instead of one yearly report, you will now be sending one monthly, weekly, or at whatever specific interval you pay your employees.
2. From April 6th you will need to include ALL employees, including nannies and domestic staff, students, casual employees, part-time staff and those below the Lower Earnings Limit on every report.
3. Forms such as P14 and P35 will no longer be used. Instead you will need to use payroll software to send a Full Payment Summary (FPS) every time you pay your employees, and an Employer Payment Summary (EPS)each month for any adjustments that you owe.You also need to report anyone joining or leaving the company in your FPS, rather than via P45 or P46 forms.
4. You won’t be able to report PAYE through paper forms or the HMRC online service any more. Instead you MUST report using recognised payroll software (if you have less than nine employees then you can download HMRC’s free Basic PAYE Tools)
5. You will be able to use payroll software to issue a NI number verification request (NVR) to trace or check a National Insurance Number rather than having to submit a form.

Don’t forget, these changes affect companies of all sizes, including self-employed people with limited companies (whether or not you employ additional staff). If you are in any doubt about how these changes effect you then speak to us to ensure you are up to date.

What you need to do

In order to be ready for RTI there are some things you will need to do before April:

• Update your existing payroll software to allow for real time reporting to HMRC.
• Set up payroll software if you don’t already use this, or download HMRC’s Basic PAYE Tools if you have less than nine employees.
• Register for PAYE Online if you don’t already use this.
• Make sure all information needed for the new system is in place – you may need information that you didn’t previously.
• Ensure your employee data is up-to-date and correct – again, you may need additional information.
• Align HMRC’s data with yours – when you start your RTI reporting you will need to tell HMRC about all your employees using either an Employer Alignment Submission (EAS) or FPS.

Although it might sound complicated now, once set up the new system should actually benefit employers. Whilst real time reporting will not affect what and when you pay, the fact that HMRC will have a much more accurate view of your deductions will mean that any discrepancies or errors are resolved much quicker.

​Still not sure what you need to do or if you have the right systems in place? Mendip Accounting Solutions are fully up-to-date with the new procedures and all set up for RTI, so give us a call on 01934 835963 and we would be happy to help.