RTI tax reporting will take tax into the 21st century, say HMRC

From this week, all employers will receive a letter from HMRC telling them what they need to do to get ready for the introduction in April of RTI, the biggest reform of business tax reporting in 70 years.

Under RTI, every employer in the country will move to a new way of reporting tax and national insurance deductions from employees’ wages and salaries. This updates the PAYE system so that it is quicker, easier and more accurate.

Employers will benefit from much simpler requirements for reporting to HMRC and from the abolition of the extensive annual tax return that the old system required. Savings to business will total £300 million in reduced administration costs once the system is up and running.

Employees, particularly the million people in the UK who have multiple jobs, will benefit from HMRC getting details of their tax every time that their wages are paid,rather than just once a year. This will make HMRC’s records more accurate and up-to-date and will begin to reduce the number of cases where someone is found to have under or overpaid tax during the year.

Britain will benefit from HMRC getting the right tax in on time, receiving the £3 billion that is currently not paid until the end of the year.

When the new Universal Credit system comes in, it will be underpinned by RTI, ensuring it always pays to work and the system is responsive to individuals’ changing circumstances. Until then, RTI will increase the accuracy of HMRC’s information about tax credits claimants, enabling better detection of fraud and error in the system and potentially saving the UK hundreds of millions of pounds.

Lin Homer, Chief Executive of HMRC, said:

“PAYE directly affects every employee in the country and that is why it is vital that it reflects, on time and accurately, the tax circumstances of the millions of employees who depend on the system to get their tax right.

“RTI delivers on all fronts. Business costs will be cut by £300 million a year, employees will be taxed more accurately and fraud and error in the tax credit system will be reduced by hundreds of millions of pounds every year.

“Employers can find all the information they need on our website about moving onto the new system, and small businesses can download our free software to help them get ready. Businesses should act now to be ready for April, when RTI comes in.”

Diane Jones, practice manager, Yorkshire Street Doctor’s Surgery, said:

“After the first time, it’s straightforward every month. It’s just an extra click at the end of your usual routine.”

Barbara Dunn, centre manager, Horden Youth and Community Centre, said:

“It’s just a case of clicking another button.”

HMRC is offering a range of help for businesses to prepare for the change, including free software for employers with nine or fewer employees, targeted flyers and emails, regular live Twitter Q&As, YouTube videos and roadshows across the country.