Real Time Information: how PAYE reporting works

Real Time Information reporting became mandatory for UK employers in April 2013, and it now carries data on around 30.2 million payrolled employees to HMRC every time they are paid ^[1][2]. Before it, employers told HMRC about pay and deductions once a year, after the tax year had closed ^[1]. The shift from one annual return to a report on or before every payday is the single biggest change to Pay As You Earn since the system began.

Real Time Information, almost always shortened to RTI, is not a form or a piece of software. It is the framework that governs how and when employers and pension providers report payroll data to HMRC ^[3]. Under RTI, the data flows to HMRC as each payment is made, rather than being reconciled months later.

This article explains what RTI is, why it replaced the old annual system, the different returns that make it up, who has to comply and how they start, the calendar the reporting follows, and what happens when a submission is late or wrong. It is written for any UK employer running PAYE, from a first-time employer registering a scheme to a bureau filing for hundreds of clients.

Key takeaways

• RTI requires employers to report pay and deductions to HMRC on or before each payday, not once a year ^[3].
• It has been mandatory for employers since April 2013 and provides the data platform for Universal Credit ^[1].
• The two core returns are the Full Payment Submission and the Employer Payment Summary ^[4].
• RTI removed the old P35 annual return and P14 end-of-year summaries, building year-end totals from routine submissions instead ^[4].
• Late or missing RTI returns attract penalties of £100 to £400 a month depending on headcount ^[5].

What Real Time Information is

How RTI changed PAYE reporting

RTI did not change what PAYE calculates. Income tax, National Insurance and student loan deductions are worked out as they always were. What changed is the timing and the channel of the reporting to HMRC ^[3]. Under the old system, employers submitted a single annual return after the tax year end. Under RTI, they send data online each time a payment is made ^[1].

The practical effect is that every figure is visible to HMRC in close to real time. An employer can no longer wait until year-end to reconcile pay and deductions, because the record is built payment by payment across the year ^[4]. This is why RTI compliance sits at the centre of running payroll, and why HMRC-recognised payroll software for SMEs treats real-time filing as a core function rather than an add-on.

Why RTI was introduced

The reform was designed to deliver benefits to HMRC, employers and employees at once. For employees, it reduces the risk of over or underpaying tax, because the record stays current rather than being corrected long after the fact ^[3]. For employers, it simplified year-end by removing the annual return and streamlined how starters and leavers are reported ^[3].

The larger driver was Universal Credit. RTI provides the essential data platform that lets the benefit system calculate awards from up-to-date earnings information ^[1]. That link is why late or inaccurate submissions carry a wider cost: a delayed FPS can distort an employee's Universal Credit award, not just the employer's own record ^[6]. Reducing the scope for error and fraud was a further stated aim of the design ^[3].

The RTI submission types

The Full Payment Submission

The Full Payment Submission is the main RTI return. An employer sends an FPS each time it pays employees, whatever the length of employment or the amount of pay, giving full details of the payment and the deductions from it ^[4]. HMRC uses the liability data in the FPS, income tax, employer and employee National Insurance, and student or postgraduate loan deductions, to work out what the employer must pay after each tax month ^[4].

The FPS also absorbed jobs that used to need separate forms. Starter details go on the FPS rather than on a P46 or a P45 part 3, and leaver details go on the FPS rather than on a P45 sent to HMRC, though the employer still gives the departing employee their P45 ^[4]. The mechanics of that return are covered in depth in the guide to the Full Payment Submission.

The Employer Payment Summary

The Employer Payment Summary is the second RTI return, and it works in the opposite direction. Where the FPS reports what is owed, the EPS reports the amounts that reduce that liability ^[4]. It carries recovered statutory payments, the National Insurance compensation on those payments, Construction Industry Scheme deductions suffered, and the Employment Allowance ^[4].

The EPS is also the return for a month with no pay. If no payments are made in a pay period, the employer does not send an FPS, but must send a nil EPS to confirm that no return or payment is due, even a quarterly payer ^[4]. Failing to send it results in a filing penalty and a specified charge ^[4]. The full detail of when and how to file it sits in the guide to the Employer Payment Summary.

Year-end records and earlier year corrections

RTI removed the P35 annual return and its supporting P14 summaries. Instead, the running totals of taxable pay and tax built up through routine FPS submissions let HMRC create an End of Year Record for each live employment automatically ^[4]. The final submission of the year is flagged as such, which starts the year-end process ^[4].

Correcting a prior year changed too. The Earlier Year Update, once used to adjust a closed year, stopped being valid from the 2020 to 2021 tax year onward, and corrections are now made by sending a further year-to-date FPS instead ^[4]. The table below summarises the main RTI submission types.

Who must report under RTI and how to start

Registering and setting up

Any business paying employees under PAYE must report through RTI, which means the first step is registering as an employer with HMRC. Registration should not happen until there is a confirmed start date for the first member of staff, and the earliest it can be done is two months before paying them ^[7]. Most limited companies can register online ^[7].

Registration produces the credentials RTI depends on. The employer gets a PAYE reference and a login for PAYE Online, which is where the amount owed and the submission history can be viewed ^[8]. From there the employer records employee details, calculates pay and deductions, and reports to HMRC ^[8]. For a business embedding payroll into its own product, an HMRC-recognised payroll API handles the RTI submissions behind the scenes, so the host platform does not build the filing logic itself.

Choosing RTI-capable software

RTI reporting has to be done through software that can file it. An employer running payroll itself needs HMRC-approved software that submits FPS and EPS returns electronically ^[9]. HMRC lists commercial products and provides a free tool of its own ^[9].

The free tool has firm limits. Basic PAYE Tools works for businesses with fewer than 10 employees and can work out deductions and file in real time, but the employer must already be registered and hold a PAYE Online login to use it ^[10]. It produces no payslips and does not assess auto-enrolment, so most employers move to commercial software as they grow ^[10]. A payroll bureau filing for many clients needs software that scales across schemes rather than a single-scheme desktop tool.

The RTI reporting calendar

The on-or-before rule

The rule at the heart of RTI is that the FPS must reach HMRC on or before the date the employee is paid ^[6]. This is the on-or-before requirement, and it applies to every regular pay run ^[3]. When RTI began, HMRC ran a temporary easement letting small employers report monthly, but that relaxation ended in April 2014, and the standard rule has applied since ^[1].

There are defined exceptions where an FPS may follow payday, each recorded with a late-reporting reason code, such as an unpredictable payment calculated on the day ^[11]. Whatever the pay frequency, each payslip has to match the pay reported on the FPS, which is why an on-demand payslip service has to align with the RTI figures rather than sit apart from them.

Paying HMRC after reporting

Reporting and paying are separate steps in RTI. The FPS reports the liability, and any EPS reduces it, but the payment follows on a fixed monthly rhythm ^[12]. The tax month runs from the 6th to the 5th, and HMRC must be paid by the 22nd electronically, or the 19th by post ^[12]. The table sets out the sequence.

What happens when RTI reporting goes wrong

Penalties for late or missing submissions

RTI penalties apply per PAYE scheme per tax month, and the amount depends on the number of employees in the scheme ^[5]. An employer running more than one scheme can be charged for each. The scale is published and fixed.

Several easements soften the edges. A penalty is not charged where all payments on a late FPS are within three days of payday, a new employer is protected for a first FPS within 30 days of paying someone, and every employer gets one waived failure per tax year ^[5]. Where a return is missing entirely, HMRC can raise a specified charge based on its own estimate, which only clears once the missing FPS or EPS is filed ^[5].

Correcting RTI errors

RTI corrections work forward, not by overwriting a sent return. Most errors in the current year are fixed by sending an updated FPS carrying the corrected year-to-date figures, which HMRC uses to adjust the record ^[13]. An EPS error is corrected by sending a fresh EPS with the right scheme-level figures ^[13].

The timing of a correction interacts with the year boundary. An employer can submit an FPS for the previous tax year up to 19 April, but from 20 April onward a prior-year correction is made through a further year-to-date FPS ^[4]. Because corrections cascade through the totals, getting deductions right the first time keeps the record clean, which in turn keeps each employee's tax position and any employer National Insurance figure accurate.

Conclusion

Real Time Information turned PAYE from an annual reconciliation into a continuous stream of data, and everything else about modern payroll, the deadlines, the penalties, the correction rules, follows from that single design choice. The system rewards employers who report accurately and on time, and it exposes those who do not the moment they slip, because HMRC sees the gap in real time.

The steady lesson across every RTI obligation is that reliability comes from removing manual steps. When the FPS files on or before payday, the EPS captures reductions inside the window, and corrections flow through year-to-date figures without hand-editing, RTI stops being a source of anxiety and becomes what it was meant to be: an accurate, current record that serves the employer, the employee and HMRC at the same time.

Frequently asked questions

When did Real Time Information become mandatory?

RTI reporting became mandatory for employers in April 2013, following a pilot ^[1]. A temporary easement let small employers report monthly at first, but that ended in April 2014, after which the on-or-before rule applied to all regular pay runs ^[1]. RTI replaced the previous system of a single annual return after the tax year end ^[3].

What are the main RTI submissions an employer sends?

The two core returns are the Full Payment Submission, sent on or before every payday, and the Employer Payment Summary, sent when a reduction applies or no one was paid in a month ^[4]. Year-end records are built automatically from the FPS totals, and prior-year corrections are made through a further year-to-date FPS ^[4].

Does RTI still require an end-of-year return?

No. RTI removed the P35 annual return and the supporting P14 summaries ^[4]. The running totals from routine FPS submissions let HMRC build an End of Year Record for each employment, and the employer only needs to flag the final submission of the tax year ^[4].

Can an employer use free software to meet RTI obligations?

A very small employer can. HMRC's Basic PAYE Tools files RTI returns in real time for businesses with fewer than 10 employees, provided the employer is registered and has a PAYE Online login ^[10]. It produces no payslips and does not assess auto-enrolment, so most employers use commercial HMRC-approved software as their payroll grows more complex ^[9].