In theory, you can do your payroll yourself by hand. 6% of employees are still paid using the manual payroll system. HMRC’s starter pack provides all the information free of charge that you need to calculate your payroll. But calculating pay manually can be fiddly.
You also need to stay up to date with tax changes throughout the year. And so much tax information already has to be submitted online — including VAT returns from April 2012 — that a trip to the Post Office with a brown envelope stuffed with cheques or details for HMRC is probably no longer practical.
Parliamentary officials have cautioned that firms without electronic payrolls will struggle with RTI. Chas Roy-Chowdhury, head of tax at ACCA, also warns: ‘These businesses will have to act very quickly to become computerised — it will be essential.
‘RTI has been set up to link to the benefits system by providing up-to-date information about claimants’ employment income. So if you make a mistake, your employees might not get the right tax credits.
‘And because it’s your responsibility to get pay right, if you underpay tax or NICs, your firm, not the employee, gets the bill from HMRC. So if you have made a mistake from calculating manually, it could cost you.
‘Whether you decide to use payroll software, a payroll agency or your accountant, under RTI you will have to file all your information in a very timely manner, including details for new recruits, leavers and so on,’ explains Chas. ‘Accuracy and timing will become more important.’