In theory it will eliminate annual reconciliations and end-of-year forms such as P14s and P35s.
All schemes/employers with less than 5,000 employees will start to submit RTI in April 2013; those with 5,000 employees or more will start to submit RTI on dates agreed with HMRC between June and Sept 2013.
As per HMRC:
"The move to reporting information in real time is the biggest change to the operation of PAYE in over 60 years.Here are some useful links:
Under real time reporting, employers and pension providers – or agents, payroll bureaux and other intermediaries acting on their behalf – will send us information about tax, National Insurance Contributions (NICs), student loans and other deductions each time they pay their employees. This will enable HMRC to keep more accurate records and, over time, more people will pay the correct tax.
So what are the essential facts you need to know?
• Migration to reporting PAYE information in real time is mandatory
• Most employers and pension providers will move to reporting PAYE information in real time from April 2013
• We will write to you
– in October to tell you what you need to do to get ready
– in February to confirm the date from which you should start reporting PAYE information in real time
• Most employers already send PAYE information electronically and information reported in real time will also be sent online. Your payroll software will collect the necessary information and send it to HMRC online
• You need to consider your options for payroll. A wide range of commercial software designed for real time reporting will be available from April 2013 to suit employers’ and pension providers’ individual requirements, including some free products. HMRC’s Basic PAYE Tools will also be available for employers who have nine or fewer employees. You can get more information about this at www.hmrc.gov.uk/paye/intro/payroll-system.htm
• You will need to include information in your RTI submissions about all employees
• We will no longer require the end-of-year Employer Annual Return forms P35 and P14, and you won’t need to send forms P45 and P46 to us; instead you will include this information with the information reported in real time
• Employers making payments to their employees by Bacs, using their own service user number, will need to include a cross-reference in the RTI data submission and their Bacs payment instruction, see Getting ready to operate PAYE in real time.
What will not change?
• The way tax and National Insurance contributions are calculated will not change
• You will still need to give employees certificates of tax and NICs paid – form P60
• You will still need to send expenses and benefits returns (P11D and P9D) annually
• The dates by which you must pay HMRC stay the same."