UK What Is RTI

RTI compliance sounds straightforward until you hit the operational reality. Submit payroll data to HMRC on or before payment. Simple enough.

The friction emerges in the gaps between that clean instruction and your actual payroll cycle. When exactly is “before payment” if your bank processes overnight?

What happens when you discover an error three submissions later? How do you handle RTI during a software migration when half your data is trapped in the old system?

These are the questions that turn RTI from a tick-box exercise into a workflow challenge that affects everything from your payroll timing to your software procurement decisions.

What is RTI?

Real Time Information (RTI) is HMRC’s system for collecting employee and payment data from UK employers. Instead of submitting annual returns, you report payroll information each time you pay employees.

In our assessment of RTI as it applies to UK employers, we find micro-businesses face disproportionate compliance pressure: the same submission obligations apply regardless of headcount, but the available resource to manage errors and corrections does not scale.

RTI replaced the old PAYE system in 2013.

The core requirement is submitting a Full Payment Submission (FPS) on or before each pay date, plus an Employer Payment Summary (EPS) each month if you need to report non-payroll items like statutory payments or Construction Industry Scheme deductions.

For most employers, RTI means two submission types. The FPS contains employee-level data: who you paid, how much, what tax and National Insurance was deducted.

The EPS handles employer-level adjustments like recovering statutory sick pay or reporting nil-pay months.

Your RTI obligation triggers the moment you have employees on PAYE. There is no minimum company size exemption. A single employee triggers the same reporting requirement as a thousand-person payroll.

This universal application creates particular stress for micro-employers who lack dedicated payroll resources but face identical compliance complexity.

How does RTI work?

RTI operates through your payroll software submitting structured data to HMRC’s servers.

We find the error-correction mechanism is the part of RTI that most surprises first-time self-filing employers: there is no mechanism to edit a submitted FPS, so errors must be corrected through subsequent submissions with updated year-to-date figures.

Every time you process payroll, the software generates an FPS containing employee payment details and transmits it electronically.

The timing rule is strict: FPS submission on or before payment date. If you pay on the 25th, the FPS must reach HMRC by the 25th. If you pay weekly on Fridays, you submit weekly on or before Friday.

In practice, this means running payroll on Wednesday evening for Friday payment. The buffer matters when HMRC’s systems go down Thursday afternoon.

The submission process requires Government Gateway credentials and RTI-enabled payroll software. HMRC does not accept paper RTI submissions except in very limited circumstances.

This is a digital-first compliance regime.

Your software handles the technical formatting and transmission. You handle the data accuracy and timing. HMRC processes submissions in near real-time and sends acknowledgments confirming receipt or flagging errors.

Error correction happens through subsequent submissions. If you spot a mistake after submitting, you cannot edit the original FPS.

Instead, you submit corrected data in your next regular submission or file an Earlier Year Update if the error affects a previous tax year.

The correction process compounds. Fix one employee’s tax code, and you may need to adjust their year-to-date figures across multiple categories.

This creates cascading updates that can affect several subsequent submissions.

The real pain arrives when you discover a systematic error affecting multiple employees across several months. Each correction ripples forward, creating hours of reconciliation work.

Why does RTI matter for your business?

RTI compliance directly impacts your cash flow through penalty exposure and operational overhead.

In our review of how RTI shapes software procurement decisions, we find the requirement for RTI-capable payroll software effectively sets a floor on the tools a UK employer can use, ruling out basic bookkeeping software that handles payroll as a secondary feature.

Late or incorrect submissions trigger automatic penalties starting at £100 per month for small employers, scaling up to £400 monthly for larger schemes.

But the penalties are the visible cost. The hidden drain is Monday morning panic when someone realises Friday’s submission failed and the penalty clock is already ticking.

The operational impact goes beyond penalties. RTI timing requirements often force changes to your payroll processing schedule.

If you previously ran payroll on payment day, you now need to complete processing at least 24-48 hours earlier to ensure submission reaches HMRC before payment.

Your software procurement decisions become RTI-constrained. Any payroll system must handle RTI submission timing, error correction workflows, and HMRC connectivity.

This eliminates many basic bookkeeping tools that cannot submit RTI directly.

Watch how quickly Finance changes their tune about “just using the existing accounting software” once they understand the penalty exposure.

RTI affects your Finance team’s monthly close process. Because submissions are ongoing throughout the month rather than batched annually, you lose the traditional reconciliation checkpoint.

Errors discovered weeks after submission require more complex correction procedures.

For international companies, RTI creates a UK-specific compliance layer that must be managed separately from global payroll systems.

You cannot simply run UK employees through your existing international platform unless it specifically handles RTI submission requirements.

The data quality implications are immediate. RTI errors affect employees’ tax codes, National Insurance records, and benefit eligibility in real-time.

Unlike annual corrections that could wait months to resolve, RTI mistakes impact employee pay calculations within the next payroll cycle.

An incorrect submission today becomes an awkward conversation with an employee next week when their take-home pay drops unexpectedly.

What are the alternatives?

RTI is mandatory for all PAYE employers. There are no alternatives to the core compliance requirement. However, you have choices in how you fulfill the obligation.

In-house payroll requires RTI-capable software and internal expertise to manage submissions, corrections, and penalty mitigation.

This works for employers with dedicated payroll resources who value direct control over timing and data accuracy.

The control comes with accountability. When submissions fail, there is no bureau to blame.

Payroll bureau services handle RTI submission as part of their standard offering. The bureau manages Government Gateway credentials, submission timing, and error correction workflows.

This shifts RTI compliance from your internal resource to theirs.

For very small employers, HMRC offers Basic PAYE Tools as free software. It handles RTI submissions for straightforward scenarios but lacks the automation and integration features of commercial payroll platforms.

“Free” here means no licensing cost but significant time investment in manual data entry and submission monitoring.

Hybrid approaches combine bureau services for RTI compliance with internal payroll processing.

Some employers use this model during payroll software transitions or seasonal hiring peaks when internal capacity is strained.

The choice depends on your risk tolerance around compliance timing, internal resource availability, and integration needs with your existing finance systems.

None of these approaches eliminate the underlying RTI obligation, but they distribute the administrative burden differently.

Pick based on where you want the stress to land when things go wrong, not where you hope they will go right.

RTI FAQs

What happens if I miss an RTI submission deadline?

HMRC issues automatic penalties for late RTI submissions. First-time late filers receive a notice but no financial charge.

Subsequent late submissions in the same tax year trigger monthly penalties of £100 for 1-9 employees, £200 for 10-49, £300 for 50-249, and £400 for 250 or more. Penalties accumulate every month until you bring filings up to date, so a single overlooked FPS can compound fast.

Can I submit RTI manually without payroll software?

No. RTI requires electronic submission through approved software connected to HMRC systems. Paper submissions are not accepted except where HMRC grants a specific exemption.

You must use commercial payroll software, HMRC's free Basic PAYE Tools, or a payroll bureau that handles electronic submission on your behalf. HMRC's Running payroll guidance sets out the FPS and EPS submissions every PAYE employer reports each pay period.

Most modern payroll platforms automate FPS generation, validation, and transmission so the only manual step is approving each run.

How do I correct an RTI submission error?

Submit corrected data in your next regular FPS rather than filing a separate correction. If the error affects a previous tax year, use the Earlier Year Update process instead.

For current tax year fixes, include the revised employee data in your next submission with updated year-to-date figures. The correction process is cumulative, so fixing one error may require adjusting several subsequent submissions to keep year-to-date totals accurate.

Does RTI affect my company's corporation tax or VAT obligations?

RTI is specific to PAYE and National Insurance obligations. It does not directly change your corporation tax or VAT reporting requirements.

However, the employee data collected through RTI feeds HMRC's wider business intelligence systems, and the payroll costs you report through RTI flow into your corporation tax calculations as employment expenses. Inconsistencies between RTI totals and your statutory accounts are a common trigger for HMRC compliance checks.

Methodology and disclosure