In April of 2013, the UK saw the biggest change to the tax system in nearly 70 years – Real Time Information (RTI).
Historically, the British government has implemented such changes in response to economic conditions, with the goal of increasing efficiency in the system. The first major change came in 1944 under Winston Churchill, when the growing number of taxpayers during world war II led to the need for a more efficient tax collection system. The result was Pay As You Earn (PAYE), a system in which tax and national insurance deductions are made each pay period.
However, the system was designed when it was common for people to have just one job for most of their life, and so reporting was still on an annual schedule. Now, not only do many people change jobs more frequently, but they also are more likely to have multiple employments or pensions, as well as complex benefits and expenses packages.
RTI payroll software
Over the past few years, HMRC has worked to introduce another major change: Real Time Information. Under RTI, employers must use payroll software to electronically send HMRC tax information each time they pay their employees. This means that the government is able to keep up-to-date information about employment and pension income despite the increased frequency of job changes, and can therefore maintain more accurate records and better ensure that people pay the correct amount of tax.
The introduction of RTI has meant that employers have had to rethink their approach to payroll reporting. For some, this meant designing new policies and procedures to capture the newly required information, while for others it meant changing their existing payroll system.
Seamless payroll & accounting that’s easy to use and RTI compliant
Here at Xero, we understand that a smooth-running payroll system is vital to the success of any small business, so Xero users have the ability to integrate with HMRC accredited payroll software providers in our Add-On Marketplace.
In addition, we’ve begun working to build out UK payroll in Xero that’s easy to use and RTI compliant. UK Payroll in Xero will seamlessly update the general ledger, meaning that whenever you process a pay run, the information will show immediately in the accounting system without having to export data.
Here’s a sneak peek of what we’re working on:
We’re working hard to make this a reality. As we get closer to the end of 2014 and into early 2015 we’ll share and update you on what will be available and when.