PAYE is changing soon. Are you ready?

If you haven’t already, you need to start getting ready from today. First, speak to your payroll software provider, if you have one, to make sure your software will allow you to meet your obligations from April 2013

With the biggest overhaul to the Pay As You Earn (PAYE) system in almost 70 years it is time for employers to get ready. HMRC’s Jane Brothwood, HMRC’s head of Real Time Information Communications at HMRC, explains how Real Time Information (RTI) will revolutionise PAYE.

From April, employers will be required to move to a new way of reporting PAYE. For the vast majority of employers, the first ‘real time’ return will be the first employee payday on or after 6 April 2013.

Reporting PAYE in real time will be quicker, easier and more accurate for employers.

Your payroll software will need to calculate your PAYE and send the PAYE information to HMRC as part of a routine payroll operation. You should also look carefully at your payroll practices as - although the way PAYE is calculated is not changing - some of the practices that you use may not work for real time reporting.

What does it mean in practice?

Reporting PAYE does not change how or when people are paid, or when employers pay income tax and national insurance to HMRC.

Instead of sending in the P14 and P35 forms at the end of year you (or your agent, bookkeeper or payroll bureau) will:

· send a Full Payment Submission (FPS) each time, or before you pay employees

· send an Employer Payment Summary each month, which shows any adjustments to the amount you owe

· send an Earlier Year Update to correct errors or make adjustments to earlier years.

It’s also worth noting that the FPS is not available through HMRC Online – you will need to use RTI-enabled payroll software to generate your return.

What you need to do

If you haven’t already, you need to start getting ready from today. First, speak to your payroll software provider, if you have one, to make sure your software will allow you to meet your obligations from April 2013.

If you do not use a payroll service provider or have software, there is a wide range of commercial payroll software products available – including some free/low cost products. A list of HMRC-recognised products can be found on our website.

HMRC’s free basic software, Basic PAYE Tools, will also be available for the smallest employers (with nine or fewer employees).

It is also vital that you check the employee information you hold is accurate and up-to-date. It is particularly important that surname, forename, gender, address, date of birth and National Insurance Number are correct and in the right format.

We want to help and support all businesses to make the change so we will therefore not be imposing any penalties for in-year late reporting until 2014.