This article provides an overview of RTI (or Real Time Information) and how FreeAgent supports it. It also explains how FreeAgent will support the Health and Social Care Levy from April 2022.
Since 6th April 2013, employers have had to report wages, salaries, PAYE and National Insurance (NI) to HMRC in real time.
Please note that FreeAgent's payroll functionality won't be available if you have an unincorporated landlord account or if you're preparing your accounts using the cash basis accounting.
RTI applies to employers and limited companies
Real time information (or RTI) applies to anyone who is registered for PAYE, or needs to be. This means that if you employ staff or you work through a limited company that pays you a salary, RTI applies to you. If you are a sole trader or a partnership and don’t employ staff, then RTI does not apply to you. You might also want to check out HMRC’s guidelines.
How RTI works in FreeAgent
When you run and report payroll each month, FreeAgent reports your PAYE and NI in real time to HMRC. The payroll page for that month will then be updated to show that your RTI was filed successfully.
Health and Social Care Levy
Between 6th April 2022 and 5th April 2023, FreeAgent will automatically calculate the increased National Insurance contribution as per HMRC guidelines (3.9.8 National Insurance contributions - Health and Social Care Levy). A message will appear on payslips where applicable, confirming the “1.25% uplift in NICs funds NHS, health & social care” as per HMRC requirements to explain what these funds will be used for.
This will impact payslips raised within the 2022/23 tax year and where the employee is due to pay National Insurance. However, you can edit their payroll profile to remove this message from all of their payslips or edit each individual payslip.
Year End (Month 12) Payroll Submission
Making your final (Month 12) submission is very straightforward in FreeAgent. Run and report Month 12 as usual and FreeAgent will send an FPS (Full Payment Submission) to declare your pay and close down your payroll year. If you're expecting to see a series of Month 12 questions, don't worry, these are no longer required by HMRC.
If you file RTI late, you need to provide a reason
If you file RTI late, you will need to choose a reason from a list provided by HMRC before you run and report that month's payroll.
Making a new monthly submission after the end of the tax year
If you have been using FreeAgent for payroll but haven't made all the submissions for the previous tax year, FreeAgent will automatically send a further Full Payment Submission (FPS) when you run your payroll.
This will apply if you need to make a payroll submission for the previous tax year after 19th April. To file the missing submission, please follow these steps.
Once you have done this, you will see confirmation that a Full Payment Submission has been submitted in the 'Payroll Summary' panel in FreeAgent. Please note that FreeAgent does not support other types of amended Full Payment Submissions.
You may be handed a penalty for filing RTI late
For more information, take a look at HMRC’s explanation of the penalty system.
Due a repayment of PAYE and NI?
There may be times when you are due a repayment from HMRC for PAYE and NI. If this is the case, you will usually need to either deduct the amount you are owed from your PAYE/NI liability in the following month or contact HMRC's employer's helpline to request a refund. Further information is available at gov.uk.
Closing payroll scheme
If you wish to submit an EPS or FPS to close your pay scheme we suggest doing that directly through HMRC's Basic Tools. You can still use FreeAgent to submit your FPS, which is the submission that tells HMRC how much you've paid your staff, but then you would also make an EPS/FPS submission using Basic Tools to tell HMRC that you've closed your payroll.
If you are preparing to use FreeAgent’s payroll for the first time, make sure you’re registered for PAYE online with HMRC first, then follow the steps in our guide to setting up payroll. You might also find it helpful to take a look at our frequently asked questions.
FreeAgent’s payroll feature index
- FPS (Full Payment Submission)
Amended FPS (FreeAgent only supports the submission of an amended FPS when a month has been missed)
- EPS (Employer Payment Summary)
- Monthly Pay
- Student Loans
- Payroll Giving
- Statutory Maternity Pay (SMP)
- Statutory Adoption Pay
- Ordinary Statutory Paternity Pay
- Additional Statutory Paternity Pay
- Week 1 Month 1 tax deductions
- Director/Employee NICs (progressively or equal payments)
- NI category letters A, B, C, H, J, M, V, X, Z
- NIC calculations for employees over 65
- The irregular work pattern indicator
- Regular working hours (for calculation of tax credits)
- The Employment Allowance
- Attachments of Earnings
- Employees with no National Insurance number
CIS (Construction Industry Scheme)
- Shared parental pay
- Parental bereavement pay
- Health and Social Care levy
- EAS (Employer Alignment Submission)
- Corrections to previously filed submissions
- Closing payroll (FPS/EPS)
- Weekly/Two weekly/Four weekly pay
- Annual pay
- Employees contracted out of the state pension
- Seconded foreign employees
- PAYE schemes run by pension funds
- Payments covering a number of payment periods
- The National Insurance holiday scheme
- Expenses added to a payslip
- Benefits in Kind taxed through payroll
- Strike and absence pay deductions