What is RTI? A guide to HMRC’s payroll regulation

Payroll can be tricky to understand at first. When many small employers begin to hire staff, they can be overwhelmed by the amount of regulation they need to consider.

But even with payroll software, RTI submissions aren’t straightforward. Our guide breaks down everything employers need to know, including how to comply with RTI regulation and avoid costly penalties.

What does RTI stand for?

RTI stands for Real Time Information. It’s a term used by HMRC to describe the system of payroll reporting.

RTI meaning and how it applies to your business

RTI is a process brought in by the government in 2013 to improve the efficiency and accuracy of payroll reporting from businesses. It marked the beginning of HMRC collecting payroll information on a monthly basis rather than annually.

An employer will send the details of their employee’s payroll over to HMRC to help them work out the Pay As You Earn (PAYE) and National Insurance contributions (NIC) for the following month.

How an RTI submission works

When submitting your payroll information under RTI, you’ll typically make a Full Payment Submission (FPS). It’s essentially a file that’s sent to HMRC that includes your employee’s:

gross pay
National Insurance contributions
payment date
deductions like student loan repayments or pension contributions

Most payroll software will automatically create an FPS file that you can send to HMRC. But you can also manually enter these details into HMRC’s online portal.

There’s also something called an Employer Payment Summary (EPS) which you send to HMRC if something is different about the month’s reporting. For example, if you weren’t paying an employee one month or wanted to claim back statutory pay, you’d fill out an EPS to let HMRC know.

How to comply with RTI on your payroll

To be RTI complaint, you need to provide accurate and timely information about your payroll every payday. There’s a few things to consider to make sure you follow HMRC’s guidelines:

accurate reporting – provide your employee’s accurate earnings, tax deductions, and National Insurance contributions. And if you notice a mistake, send an amended FPS to HMRC as soon as possible

meet the deadlines – you must provide the payroll information on or before payday

detailed records – maintain accurate records of your employee’s personal details (National Insurance number, address, etc.) and payment history including gross pay, deductions, and payment dates

appropriate technology – use HMRC approved payroll software

RTI for seasonal or temporary staff

To be compliant with RTI rules, you need to treat every employee the same on your payroll, regardless of how often they work for you. They must be included in your payroll submission for any month that they work for you, the same as your other employees.

Penalties for not complying with RTI

The fines for missing an RTI deadline vary depending on the number of employees you have:

one to nine employees – £100
10 to 49 employees – £200
50 to 249 employees – £300
250 or more employees – £400

But the penalties increase if you continue to miss the deadline. For small businesses, the fines can rise up to £400 for each monthly deadline that’s missed.

Much like tax deadlines, HMRC have reasonable excuses for late filing like serious illness or bereavement, for example.

Can you dispute RTI deductions?

Yes, you can dispute a few different deductions if you feel there’s a discrepancy. Typical things for employers to call out are:

incorrect PAYE liability – if you believe HMRC has calculated your PAYE tax liability incorrectly, you can dispute it. This might occur due to errors in your RTI submissions or HMRC’s calculations
National Insurance – discrepancies in your National Insurance contributions, such as being overcharged or charged for employees who are exempt
statutory payments – if you’ve reclaimed statutory payments (Statutory Maternity Pay, for example) through an EPS and believe the amount HMRC has reimbursed is incorrect
Employment Allowance – if you’re eligible for the Employment Allowance and haven’t received the correct reduction in your National Insurance liability
penalties – if you’ve been charged penalties for late RTI submissions or payments and believe they’re incorrect or you had a reasonable excuse

How long does an RTI dispute take?

There’s no set timeframe for an RTI dispute and it’ll vary depending on the complexity of the case. HMRC’s workload, the sums of money involved, and the responsiveness of everyone involved will dictate how long the dispute takes.

Here’s a few tips that could lead to a quicker resolution:

provide clear and accurate information when you raise the dispute and provide HMRC with all the relevant details and supporting documentation
respond promptly to HMRC’s queries
keep records of communication with HMRC, including dates, times, and the content of conversations

More useful guides for small business owners

Is there anything else you’d like to know about RTI submissions? Let us know in the comments.

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