Real Time Information (RTI): how payroll reporting actually works


 

Ask a small employer what HMRC knows about their payroll, and the answer is often "everything, roughly". Under Real Time Information, "roughly" does not cut it. RTI has been the backbone of UK payroll reporting for over a decade, and it means HMRC learns what you paid your people almost as soon as you pay them. This guide explains the two RTI submissions that keep you compliant: the Full Payment Submission (FPS) and the Employer Payment Summary (EPS).

What RTI is and why it exists

Before RTI, employers told HMRC about pay once a year through the P35. Real Time Information changed that: employers now report pay and deductions to HMRC on or before every payday. Your payroll software sends a digital summary of who was paid, what they earned, and what was deducted, and HMRC uses this live data for tax codes, Universal Credit assessments, and compliance checks. It also means mistakes compound fast: an error on this month's FPS can affect an employee's tax code next month.

The Full Payment Submission (FPS)

The FPS is the workhorse of RTI. You must send it to HMRC on or before each payday, every time you pay employees. If you pay weekly, you file weekly. If your payroll is monthly, you file monthly.

Each FPS reports, per employee: gross pay for the period, Income Tax deducted under PAYE, employee and employer National Insurance, statutory payments such as SSP or SMP where applicable, student and postgraduate loan deductions, pension contributions processed through payroll, and net pay.

It also carries starter and leaver information. When someone joins, the FPS includes their starter declaration details. When someone leaves, it includes their leaving date, which is how HMRC knows to issue a P45 record. Get a leaving date wrong and a former employee can end up taxed as though they still work for you.

The "on or before" rule is strict

Late FPS submissions trigger penalties. HMRC runs an automatic penalty regime for RTI, and repeated lateness gets expensive quickly. The most common cause in small businesses is simple disorganisation: payroll run on time, submission forgotten. Choose payroll software that submits the FPS as part of the payroll run itself, not as a separate manual step.

The Employer Payment Summary (EPS)

The FPS tells HMRC what you paid. The EPS tells HMRC what adjustments apply to what you owe. You only send an EPS when there is something to report, and the deadline is the 19th of the month following the end of the tax month.

Typical reasons to file an EPS:

  • Claiming Employment Allowance. The secondary Class 1 NICs relief must be claimed through the EPS each tax year.
  • Recovering statutory payments. SMP, SSP, and other statutory payments are offset against your PAYE bill via the EPS.
  • CIS deductions suffered. Contractors in the Construction Industry Scheme reclaim suffered deductions via the EPS.
  • No payment due. If nothing was paid to employees in a tax month, an EPS reporting nil keeps HMRC from chasing a missing payment.

Small employers often miss the EPS entirely. They run clean FPS submissions all year, then wonder why their Employment Allowance never materialised or why HMRC's records show a higher PAYE debt than expected.

How FPS and EPS work together

Think of it this way: the FPS is the detail, the EPS is the adjustments, and together they produce the figure on your monthly PAYE bill. Each month, HMRC expects payment of the liabilities reported through your FPS submissions, minus the adjustments in your EPS, by the 19th (or the 22nd if you pay electronically).

Reconciling these three things, FPS data, EPS adjustments, and the actual payment, is the most valuable monthly payroll control a small employer can run.

Common RTI mistakes small employers make

Paying before filing. The rule is on or before payday. Running a same-day bank transfer first thing and filing the FPS at lunchtime is technically late. Build submission into the payroll run.

Wrong pay dates. Reporting the pay date as the day you processed payroll rather than the day the employee receives the money shifts liabilities into the wrong tax month and confuses HMRC's payment expectations.

Forgetting leavers. An employee who left in March but is never reported as a leaver stays on HMRC's books. Their new employer then runs into tax code conflicts, and the phone calls come back to you.

Good payroll software automates submissions, but it cannot know someone left, joined, or changed hours unless a human tells it. RTI is real time, so the data feeding it has to be too.

Getting it right without the headache

Every payday is a reporting event, and every submission shapes HMRC's view of your business. The system is entirely predictable: file accurate FPS submissions on time, file EPS returns when adjustments apply, and reconcile monthly.

For small employers who would rather run the business than run the payroll, handing the whole cycle to specialists is the pragmatic option. Finex Outsourcing provides payroll outsourcing support for UK employers, handling FPS and EPS submissions, PAYE reconciliation, and compliance deadlines so every payday is reported correctly, on time, every time.


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