Since 6th April 2013, employers have had to report wages, salaries, PAYE and National Insurance (NI) to HMRC in real time. Here, we provide an overview of RTI (or Real Time Information) and how FreeAgent supports it.
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. If you’re unsure whether RTI applies to your business, you can take our quick quiz to find out. 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.
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 an Earlier Year Update when you run your payroll (please note that FreeAgent does not support other types of EYU submission). This applies, for example, if you still need to make a payroll submission for the previous tax year. To file the update, you should prepare and check your payroll submission, select Run & Report and then enter your Government Gateway credentials as normal. This will submit your payroll to HMRC as an Earlier Year Update. Once you have done this, you will see confirmation that an Earlier Year Update has been submitted in the Payroll Summary panel.
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)
- EPS (Employer Payment Summary)
- Monthly Pay
- Student Loans
- Payroll Giving
- Statutory Maternity Pay
- 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, 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
Expenses reimbursed in the same payment as payroll
- Employees with no National Insurance number
CIS (Construction Industry Scheme)
- EAS (Employer Alignment Submission)
- Most Earlier Year Updates (EYUs) - FreeAgent only supports the submission of EYUs when a month has been missed
- 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