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A new system from HM Revenue & Customs (HMRC) is set to make Pay As You Earn (PAYE) simpler and less of a burden for employers.
With effect from 6 April 2013, HMRC is introducing a new way for employers and pension providers to report PAYE information, known as Real Time Information or RTI.
The new system will fundamentally change the way deductions are made, so that instead of reporting all PAYE details in one go at the end of the year, details must be sent electronically each and every time a pension payment is made – in real time.
Under the current PAYE system, income tax, National Insurance contributions and pension payments are recorded and compiled in a year end return, which is submitted at the end of each tax year. However, it is only when this annual return is reviewed that any inaccuracies or discrepancies are found.
RTI will make the PAYE process simpler for employers and pension providers by:
As a result of RTI, key pension recipient information such as name, date of birth and National Insurance number will be automatically checked against the details already held by HMRC, resulting in fewer queries about how much tax has been paid.
Warran Bolton, pension administration manager at Taylor Patterson, said: “As part of the process, we were required to review all pension data held, checking the accuracy of information to ensure that we are ready for the change well ahead of schedule.
“It’s important to remember that whilst RTI is the biggest change to the PAYE system in years, it will not affect how much money is deducted, and individuals will still have complete control over their pension payments.”
For more information about RTI and what it means for your clients and their pension payments, please contact the SIPP & SSAS team on 01772 555073.