This article has been written by Michael Bennett from MBA Ltd, an accountancy firm working with hundreds of practitioners across the UK. They are offering a 20% discount to members of the Private Practice Hub.
RTI doesn’t change the way you calculate PAYE, it just means you’ll need to make more regular submissions. Each time you pay your employees, you’ll need to submit PAYE information to HMRC, rather than just once a year at Payroll Year End.
All payroll software is now geared up to process and submit the information to HMRC, and HMRC offer their own free to download software package called Basic PAYE Tools.
Each time an employee is paid (weekly, monthly, 4 weekly or annually), an FPS (Full Payment Submission) must be sent to HMRC for each employee. If no employees are paid, an EPS (Employer Payment Submission) must be sent to HMRC informing them of no payroll activity for the period.
The advantage of regular submissions to HMRC is that they will know more accurately the amount of Tax/NI that is owed rather than having to wait until `year end`. Also, tax-free allowance changes (employee tax coding) should be more frequent and accurate, which will save an employee being under or over taxed.
When month 12 (March) is reached, there is no longer a requirement to submit a P14 or P35 to HMRC, so in effect there is no `year end` submission, just another FPS. The P60`s are still produced by the software in the normal way in month 12.
For leavers or joiners, there is no need to do a separate submission to HMRC, as this will be included in the FPS. A P45 for a leaver is produced in the normal way.
For small employers, the HMRC software is adequate for most needs and will calculate net pay and also the tax/NI that will need to be paid to HMRC. The only main function that this software will not do is to produce a standard payslip. It will however produce a report showing gross pay, net pay and deductions that can be used instead of a normal payslip. The software also has a provision for adding in maternity / paternity pay and calculating the amount to claim back from HMRC.
For more complex situations, it is advisable to purchase a payroll program such as Sage or Quickbooks. Or alternatively, instruct an accountant or payroll service to run the payroll.