What is RTI (Real Time Information)?

How does RTI work?

Before RTI, employers told HMRC what they had paid once a year. Now they tell it every time they pay anyone. The Full Payment Submission, or FPS, goes on or before payday and lists each employee, their pay, deductions and year-to-date figures. HMRC uses it to keep tax codes, Universal Credit and its own records current.

The second submission is the Employer Payment Summary, or EPS. It goes when there is something the FPS cannot say: no one was paid this period, statutory pay is being reclaimed, or the Employment Allowance is being claimed. It is due by the 19th of the following tax month.

The payroll software does the sending. What the employer has to get right is running payroll before, not after, the money goes out — a late FPS attracts a penalty once the first-offence allowance in the year is used up.

What does it look like in practice?

A landscaping firm pays two employees monthly on the 25th. On the 23rd the owner runs payroll: gross pay £2,400 and £1,900, deductions worked out, payslips produced. The software files the FPS to HMRC the same day, reporting both employees and £1,010 of tax and National Insurance due.

That £1,010, plus employer's National Insurance, is paid to HMRC by the 22nd of the following month when paying electronically. In August one employee is on holiday and the other is unpaid, so an EPS goes instead of an FPS to say no payments were made — otherwise HMRC assumes a submission is missing.

What goes wrong?

• —Paying staff and running payroll afterwards, so the FPS is late by construction.
• —Forgetting the nil EPS in a quiet month, which triggers a penalty notice and an estimated bill.
• —Correcting an old error with a fresh submission instead of a year-to-date adjustment, which double-counts.
• —Not reporting a leaver on their final FPS, so their P45 is wrong and HMRC keeps expecting them.