What Is RTI and Why Do Employers Need to File It

At Towerstone, we specialise in payroll accounting services and have written this article for employers running PAYE. The purpose of this article is to explain RTI requirements, helping you make informed decisions.

Real Time Information, commonly known as RTI, is the payroll reporting system used by HMRC. It replaced older annual reporting processes and ensures that tax, National Insurance and payroll information is sent to HMRC every time someone is paid. This modern approach gives HMRC accurate, up to date information throughout the year rather than relying on a single year end submission.

For employers, RTI is not optional. It applies to anyone running payroll, including small businesses, limited companies, charities and one person director payrolls. Whether you pay staff weekly, monthly or irregularly you must submit the correct RTI files on time. This article explains exactly what RTI is, why it is required and how to keep your payroll compliant.

What RTI Actually Means

RTI stands for Real Time Information. It is a payroll reporting framework that requires employers to send data to HMRC:

• every time they pay an employee

• on or before the actual pay date

• using payroll software that supports RTI

The system covers full time employees, part time workers, temporary staff and directors. It does not apply to volunteers who receive no wages.

RTI is made up of two main submissions:

1. Full Payment Submission (FPS)
   This reports each employee’s pay, tax, National Insurance, student loan deductions, pension contributions and statutory payments.

2. Employer Payment Summary (EPS)
   This reports adjustments such as statutory maternity pay reclaim, statutory paternity pay reclaim, Employment Allowance claims or situations where no employees were paid.

Together, these submissions allow HMRC to track payroll activity throughout the year.

Why RTI Exists

RTI was introduced to modernise payroll and make tax collection more accurate. The government moved away from relying on annual summaries because these often led to large year end corrections.

RTI was designed to:

Improve accuracy

Tax codes and deductions update faster when HMRC receives data in real time.

Reduce overpayments and underpayments of tax

Employees no longer wait until the year end to find out if they paid too much or too little.

Support Universal Credit

Universal Credit calculations depend on accurate monthly earnings data, and RTI provides this automatically.

Improve compliance

HMRC can detect payroll issues, under declared pay or incorrect tax deductions quickly.

Reduce the need for year end forms

Forms like P14 and P35 were replaced, simplifying year end tasks.

For employers it means more frequent reporting but fewer surprises.

Who Needs to File RTI

RTI applies to any employer who pays staff through payroll.

This includes:

• limited companies

• director only companies

• sole traders with employees

• partnerships with employees

• charities

• community groups

• clubs and associations

• seasonal businesses employing staff only for part of the year

If you run payroll at all you must file RTI. Even if you pay one director a small monthly salary the company must operate RTI.

What Information Employers Must Report

The information sent in RTI submissions includes:

• employee name

• National Insurance number

• tax code

• gross pay

• taxable pay

• National Insurance contributions

• student loan deductions

• pension deductions

• statutory payments such as SMP or SPP

• hours worked in the payroll band

• start and leaving dates

• corrections to previous figures

RTI ensures that HMRC always has an up to date earnings picture.

How RTI Works in Practice

Step 1: Run payroll

You calculate employee pay, deductions and any statutory payments.

Step 2: Submit the FPS

On or before the employee’s pay date your payroll software sends an FPS to HMRC.

Step 3: Make adjustments through an EPS (if needed)

You submit an EPS when you:

• claim Employment Allowance

• reclaim statutory maternity or paternity pay

• declare that no employees were paid in a period

• need to adjust a previous calculation

Step 4: Pay PAYE and National Insurance

After HMRC receives your RTI submissions your PAYE account updates. You then pay HMRC monthly or quarterly depending on your business size.

RTI submissions and PAYE payments are separate steps.

Why Employers Must File RTI

There are several reasons HMRC requires employers to file RTI regularly.

1. It ensures employee tax records are accurate

RTI keeps each employee’s tax record updated. This prevents incorrect tax codes and reduces end of year adjustments.

2. HMRC can assess tax and NI liabilities in real time

This helps HMRC monitor compliance and detect problems earlier.

3. It feeds real income data into the benefits system

Universal Credit and other benefits rely on accurate wage information.

4. It prevents fraud

Real time reporting makes it harder to hide wages or under declare income.

5. It removes the need for P35 and most year end forms

Although employers still issue P60s, the year end workload is far lighter.

6. It keeps business records aligned with HMRC

Payroll errors can be fixed quickly when both systems match.

What Happens If You Do Not File RTI

Missing or late RTI submissions can cause problems.

HMRC may issue a late filing penalty

Penalties are based on the number of employees. For very small employers penalties can start at £100 per month, although first time mistakes are commonly waived.

HMRC may generate estimated charges

If no RTI is received HMRC issues a “specified charge” which is an estimated PAYE bill. This remains on your account until the correct RTI is submitted.

Employee tax records may be affected

Employees might:

• be put on emergency tax

• have incorrect year to date figures

• face unexpected tax bills

• see delays in benefits assessments

PAYE may show overdue

Your business may appear behind on payments even if this is not the case.

Payroll errors become harder to correct

The longer an RTI issue goes uncorrected the more complicated payroll reconciliation becomes.

Do Employers Need to File RTI if No One Was Paid

Yes. If no one was paid in a particular period you must file an EPS stating that no payments were made.

Failing to do so can result in:

• HMRC assuming you paid staff

• estimated PAYE charges

• late filing penalties

This is a common mistake for director only companies.

What About Employers Who Pay Only Directors

Director only companies must still file RTI if the director is paid a salary.

If the director is not paid for a particular month they must file:

• an EPS showing no payments
  or

• no submission if annual payroll is set up correctly

RTI rules apply in exactly the same way as they do for regular employees once salary is taken.

Why Payroll Software Is Essential

RTI must be filed digitally. You cannot manually type RTI submissions into HMRC’s online account.

Payroll software:

• calculates tax and NI

• generates FPS and EPS submissions

• prevents common mistakes

• stores year to date figures

• handles director NI rules

• alerts you to missing submissions

Using software is not just recommended. It is essential for RTI compliance.

Real World Examples

Example 1: One employee paid monthly

An employee receives wages on the 25th. The FPS is submitted on or before this date. PAYE is then paid to HMRC on the normal monthly schedule.

Example 2: Director only payroll

A director pays herself £758 per month. Each month the FPS is submitted. No submission is needed if one month she is not paid because the software knows it is annual payroll.

Example 3: Small charity with volunteers and one employee

Volunteers do not require RTI. The one paid employee does. The charity files one FPS per month and occasional EPS submissions when reclaiming statutory payments.

Example 4: Business forgets to file payroll

An employer pays staff but forgets the submission. HMRC issues a specified charge. The employer submits the missing FPS which replaces the estimated charge immediately.

How to Stay Compliant All Year Round

File RTI on time every time

Submit the FPS on or before the date you pay staff.

Use reliable payroll software

Choose software that supports RTI and gives deadline reminders.

Keep employee records accurate

Correct names, addresses and NI numbers reduce errors.

Review your PAYE account monthly

This helps detect missing submissions early.

Train whoever manages payroll

Payroll errors often arise from misunderstanding the rules.

Document any changes

New starters, leavers and pay changes must be processed correctly in payroll.

Conclusion

RTI is the backbone of the UK payroll system. It requires employers to report pay, tax and National Insurance information to HMRC every time an employee is paid. The system ensures accurate tax records, supports benefit calculations and keeps employer obligations up to date. Filing RTI is a legal requirement for any employer running payroll, even if they only pay one director.

By submitting RTI on time, using proper payroll software and keeping records organised you can avoid penalties, prevent payroll errors and stay fully compliant throughout the tax year.

If you would like to explore related payroll guidance, you may find What is the difference between gross pay and net pay and What payroll information do I need to give a new employee useful. For broader PAYE rules and employer obligations, see our PAYE guidance centre.