What is Real Time Information? (RTI)
Real Time Information, commonly known as RTI, is the digital reporting system through which UK employers communicate payroll data to HM Revenue and Customs. Introduced in April 2013, it replaced a system in which employers submitted a single annual return at the end of the tax year with one that requires payroll data to be reported on or before each payday. Every time an employer pays their staff, the relevant payroll information is transmitted electronically to HMRC through compatible payroll software. This includes details of wages, Income Tax deductions, National Insurance contributions, and other statutory deductions for each employee. The data is processed by HMRC in near real time, updating employee tax records and employer liability accounts accordingly. For employers, understanding how RTI works, what submissions are required, and when they must be made is the foundation of payroll compliance in the UK.
A Practical Guide to Real Time Information
Before RTI, the PAYE system operated on a retrospective model. Employers calculated and paid over tax and National Insurance throughout the year, but the formal reconciliation of those figures took place through an annual return submitted after the tax year ended. This created significant opportunities for error, fraud, and underpayment that only became apparent long after wages had been paid.
RTI changed the fundamental structure of that relationship. Instead of a single year-end report, HMRC now receives a continuous feed of payroll data matched to each pay cycle. The system is designed to be more accurate, more transparent, and more responsive to changes in individuals’ employment and earnings than the annual model it replaced.
Understanding the mechanics of RTI and the obligations it creates is essential for any employer running UK payroll.
The Two Primary Submissions
RTI is built around two main types of submission, each serving a distinct purpose within the overall reporting framework.
The Full Payment Submission (FPS) is the core submission of the RTI system. It must be sent to HMRC on or before every payday, without exception. The FPS contains employee-level data for the pay period: each individual’s name, address, date of birth, and National Insurance number; their tax code and NI category; gross pay, net pay, and all deductions for the period; and cumulative year-to-date figures for pay, tax, and National Insurance. This submission keeps HMRC’s records aligned with what is actually being paid to each member of the workforce.
The Employer Payment Summary (EPS) is a supplementary submission sent at the employer level rather than the employee level. It is not required every month. An EPS is submitted when the employer needs to adjust the PAYE liability calculated from the FPS, for example, to reclaim statutory maternity, paternity, or shared parental pay, to claim the Employment Allowance, to report the Apprenticeship Levy, or to declare that no employees were paid during a particular tax month. Where an EPS is required, it must be submitted to HMRC by the 19th of the month following the tax month to which it relates. The UK tax month runs from the 6th of one calendar month to the 5th of the next.
A common question is whether an EPS is needed every month. The answer is no. If payroll has been run, no statutory reclaims are pending, and the Employment Allowance has already been claimed for the year, the FPS alone is sufficient for that period. However, if no employees were paid in a given tax month, an EPS must still be sent to inform HMRC that the absence of an FPS was intentional rather than an oversight.
The On or Before Rule
The timing requirement for FPS submissions is unambiguous. The FPS must be received by HMRC on or before the date employees are paid. If staff are paid on the 25th of the month, the FPS must be submitted by the 25th. If payday falls on a weekend or bank holiday and employees are paid on the preceding working day, the FPS should reflect the contractual payday, but must be submitted on or before the actual payment date.
This rule is the single most important compliance requirement in RTI. Late submission is one of the most common causes of RTI penalties, and habitual lateness attracts greater scrutiny from HMRC even where individual instances might not immediately generate a penalty notice.
HMRC typically allows an informal three-day window before issuing a late filing penalty for an FPS, but this is an administrative tolerance rather than a formal extension. Employers who consistently rely on it risk being penalised, and the tolerance does not apply in all circumstances.
Starters, Leavers, and the Employee Lifecycle
RTI gives HMRC a near real-time view of employment across the UK. The accurate and timely reporting of new starters and departing employees is therefore a high-priority obligation.
When a new employee joins, they must be added to the payroll system before their first payday. A P45 from their previous employer is the preferred source of information about their tax code. Where a P45 is not available, the employee completes a starter checklist to determine which tax code to apply. The first FPS submitted after the new starter is entered will flag them as a new joiner to HMRC.
When an employee leaves, their departure must be reported on the FPS for their final pay period, including the leaving date. Promptly reporting leavers is important not only for the employer’s own records but for the employee’s tax position with any subsequent employer. If the leaving date is not reported, HMRC continues to associate that individual with the previous employer, which can disrupt their tax code allocation when they start a new role. The P45 generated by the payroll software on departure should be provided to the employee without delay.
Statutory Payments and National Insurance Categories
Payroll rarely involves a straightforward salary payment to every employee. Statutory sick pay, statutory maternity pay, statutory paternity pay, and shared parental pay all require specific treatment in RTI submissions.
Statutory payments are included in the employee’s gross pay on the FPS. Where the employer is entitled to reclaim some or all of these payments from HMRC, the reclaim is made through the EPS. The interaction between the two submissions is important: the FPS reports the payment, and the EPS claims the credit, thereby reducing the employer’s monthly PAYE liability.
National Insurance category letters require careful assignment. The standard category for most employees is Category A, but there are specific categories for apprentices under 25, employees over the state pension age, veterans in qualifying employment, and others. An incorrect category letter will result in the wrong NI rate being calculated and submitted to HMRC, requiring correction and potentially creating reconciliation issues at year’s end.
Correcting Errors
Errors in RTI submissions are a normal part of payroll administration and can be corrected, provided the correct process is followed.
Where an employee has been overpaid, the overpayment can typically be recovered through the next regular pay run, with the corrected lower gross figure submitted on the following FPS. Where an employee has been underpaid, and the shortfall needs to be addressed before the next scheduled payday, an additional FPS must be submitted to report the supplementary payment.
Data errors, such as an incorrect National Insurance number, date of birth, or address, should be corrected in the payroll system. The updated details will be transmitted in the next FPS. For more significant data errors that may affect an employee’s tax record, HMRC can be contacted directly.
The key principle is to correct errors through the payroll system rather than making manual adjustments outside it. Corrections made outside the system cause the employer’s records to diverge from HMRC’s, which creates compounding problems when year-to-date figures are reviewed and at year’s end.
Penalties for Late Submission
HMRC operates an automated penalty system for late RTI submissions. The system is designed to be tolerant of isolated instances but progressive for employers who are consistently late.
A first late FPS submission in a tax year will typically not attract a penalty. Subsequent late submissions in the same year are more likely to be penalised. Where penalties are issued, the monthly amounts are tiered by employer size.
Employers with one to nine employees face a monthly penalty of £100 for late FPS submissions. Those with ten to forty-nine employees face £200, employers with fifty to two hundred and forty-nine employees face £300, and those with two hundred and fifty or more employees face £400. Where an FPS is more than three months overdue, an additional penalty of 5% of the tax and National Insurance due may be applied.
Late payment of PAYE liabilities calculated through RTI also attracts daily interest charges. Keeping submissions up to date and ensuring PAYE payments are made on time prevent these costs from accumulating.
Penalties can be appealed where the employer has a reasonable excuse for the late submission, such as a significant IT failure or a sudden serious illness. Administrative reasons, such as forgetting or system unfamiliarity, are not accepted grounds for appeal.
RTI and Universal Credit
The real-time nature of RTI has made it the backbone of an important function beyond tax collection. The Department for Work and Pensions uses the HMRC RTI feed to calculate Universal Credit entitlements for claimants who are in work.
Universal Credit is designed to adjust automatically as an employee’s earnings change month to month. When the FPS is submitted, that payroll data flows to the DWP, which uses it to calculate the claimant’s Universal Credit entitlement for that assessment period. If an employee earns less in a given month, their Universal Credit payment increases to compensate. If they earn more, it decreases.
The practical consequence for employers is that late or inaccurate FPS submissions directly affect the benefit income of employees who claim Universal Credit. A submission that is late, that aggregates payments in a way that does not reflect the actual payday, or that contains errors in the payment amount, can result in a claimant’s benefit being reduced or suspended incorrectly. The requirement to submit on or before payday is, therefore, not only a compliance obligation but one with material implications for employees’ financial stability.
Small Employers and RTI
There is no minimum size threshold for RTI obligations. A sole director of a limited company who pays themselves a salary above the Lower Earnings Limit for National Insurance must register for PAYE and operate RTI in exactly the same way as a large employer.
Employers who pay themselves or their staff only once a year, rather than monthly, can notify HMRC that they are annual payers. With this designation in place, a single FPS per year is sufficient rather than monthly submissions. Without notifying HMRC of this status, the system will expect monthly FPS submissions and will generate automated penalty notices when they do not arrive. Annual payers must still submit their single FPS on or before the one day in the year on which they are paid.
Year-End Procedures
RTI has distributed the payroll reporting workload more evenly across the tax year, but year-end still requires specific actions to formally close out the tax year.
When processing the final payroll of the tax year, the payroll software must be instructed that this is the final submission for the year. This is typically done by selecting a “final submission for year” indicator before the last FPS or EPS is sent. This signals to HMRC that the employer’s submissions for the tax year are complete and that employee records can be finalised.
Employers must issue a P60 to every employee on the payroll by 5 April, no later than 31 May. The P60 summarises the employee’s gross pay and deductions for the year and is an important document for the employee’s own tax affairs.
Benefits in kind provided to employees, such as company cars or private medical insurance, are not currently reported through RTI unless the employer has specifically registered to payroll those benefits. Where they are not payrolled, P11D forms must be submitted for each relevant employee by 6 July following the tax year end.
The Role of Payroll Software
RTI requires digital communication between the employer’s payroll system and HMRC’s gateway. Paper submissions are no longer an option for most employers, and manually calculating the data to be transmitted would be both impractical and highly error-prone.
HMRC provides a free tool called Basic PAYE Tools for employers with fewer than ten employees. It handles FPS and EPS submissions but does not generate payslips or integrate with accounting software, making it suitable only for the simplest payroll structures.
Most employers use commercial payroll software that automates the calculation of Income Tax, National Insurance, and statutory payments, generates payslips, produces the required HMRC submissions in the correct format, and transmits them through the HMRC gateway. Integration with cloud accounting platforms enables payroll journals to be posted automatically, reducing manual reconciliation for finance teams.
The quality and reliability of the payroll software in use has a direct bearing on RTI compliance. Software that correctly calculates NI categories, flags when EPS submissions are required, monitors transitions between tax years, and generates accurate year-to-date figures is essential for employers who want to manage RTI without the risk of compounding errors.
A Continuous Obligation
RTI is not a one-off process or an annual event. It is a continuous obligation that arises with every pay run, every new starter, every leaver, and every month in which statutory reclaims or adjustments are required. The discipline required to maintain compliance is built into the payroll cycle rather than concentrated at the year-end.
For employers with robust payroll software and clear internal processes, that discipline becomes routine. Submissions go out on time, data is accurate, and corrections are made through the system as they arise. The obligations are predictable, and the consequences of meeting them are simply good, clean records.
Thorough understanding of RTI is the foundation for all of that. Once the structure is clear, the individual submissions that make up the system become straightforward steps rather than sources of uncertainty.
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