If you’ve registered as an employer in the UK, you’ve already agreed to do something most business owners never think about explicitly: report your payroll to HMRC essentially every time you pay someone, rather than once a year. That’s RTI, and understanding it properly is what stops you from making the most common — and most penalised — payroll mistake small businesses make.
What is Real Time Information?
Real Time Information is the system HMRC introduced in 2013 to replace the old end-of-year payroll reporting. Before RTI, employers reported PAYE information annually, after the tax year had already finished. Now you report on or before the day you actually pay your employees, every pay run, not once a year.
In practice, your payroll software sends HMRC a Full Payment Submission each time you pay staff, detailing what each employee was paid, how much tax and National Insurance was deducted, and other details like student loan repayments or pension contributions. HMRC builds a real-time picture of what every employer in the country is paying, rather than reconstructing it from annual returns after the fact.
This is also why payroll software has to be “HMRC recognised.” Submitting RTI requires software tested and approved to talk to HMRC’s systems directly — you can’t email a spreadsheet and call it done.
What do you submit?
The core submission is the Full Payment Submission, sent on or before each payday, covering pay, deductions, and starter or leaver information for that pay run. Monthly payroll means roughly twelve submissions a year; weekly payroll means weekly submissions.
There’s also an Employer Payment Summary, sent only when needed — recovering statutory payments, claiming the Employment Allowance, or reporting that no payments were made in a period. Not every employer needs one every month; it depends on what’s happened in your payroll that period.
Most small businesses using decent payroll software never think about these as separate things, because the software handles the distinction automatically. Still worth knowing they exist — understanding what’s actually being sent makes it easier to spot what’s gone wrong if something does.
The deadlines
The Full Payment Submission is due on or before the date you actually pay your employees. Not the date you process payroll, not the date you meant to pay them. If payday is the 28th, the submission is due by the 28th.
This is the single most common compliance slip for small businesses, especially in the early months of running payroll. Everything’s calculated correctly, staff are paid on time, but the RTI report goes in a day or two late — maybe because payroll was run early and the actual submission got forgotten, or a software glitch wasn’t caught in time. HMRC’s penalty regime doesn’t care that the payment itself was correct and timely. The submission deadline is the thing being measured.
If you do miss one, report it late as soon as you notice. Silence makes it worse, not better.
Penalties if you get it wrong
HMRC runs a penalty system for late RTI submissions, scaled to employee numbers. For most small employers it’s a fixed amount per missed deadline, with some leeway — the first late submission in a tax year typically doesn’t trigger a penalty. Persistent lateness escalates from there.
There’s a knock-on consequence that matters more for most small businesses than the direct penalty: late or incorrect RTI submissions can disrupt an employee’s Universal Credit, since the DWP uses RTI data to assess benefit entitlement in real time. A late or wrong submission can affect someone’s benefit payment — a genuinely bad position to put a member of staff in over what’s usually a simple administrative slip on your end.
Where things go wrong
Submitting after payday rather than on or before it is the most frequent error, by some distance.
Getting starter and leaver information wrong is the next most common. When someone joins or leaves, the FPS needs an accurate starter declaration — which sets their initial tax code — and the correct leaver date. Get this wrong and an employee can be taxed incorrectly, which becomes your problem to untangle even though the error sat in payroll admin.
Inconsistent figures between systems crop up when a business calculates pay in one tool and submits through another — more common than you’d think when spreadsheets and separate RTI tools get cobbled together. Software that calculates and submits in one integrated process avoids this entirely.
Forgetting an EPS when one’s actually needed — after claiming Employment Allowance, say, or reporting a no-payment period — means HMRC’s records don’t reflect what’s actually happening in your business, even though your FPS submissions were fine.
And anyone who ran payroll before 2013, or who’s simply unfamiliar with UK payroll, can default to treating reporting as a year-end task out of old habit. It isn’t, and the mental model matters because it affects how seriously each individual pay run gets taken.
What the software handles for you
This is the real argument for HMRC-recognised payroll software over managing things manually: RTI compliance is largely automatic once set up correctly. The software calculates pay, generates the FPS, and submits it as part of the normal pay run — usually with a clear confirmation that it went through.
What’s still on you: actually running payroll on time, entering starter and leaver details accurately as they happen, and checking that submissions genuinely succeeded rather than assuming silence means success. Most software shows a clear confirmation or rejection message. Ignoring those is how RTI errors slip through even with good software behind you.
RTI for small business
RTI isn’t something you need to actively manage day to day once you’re on proper payroll software — that’s the whole point of HMRC-recognised tools, free or paid. What you do need is a basic feel for why the timing matters, so “I’ll run payroll a couple of days late this month” registers as a compliance risk rather than just a scheduling inconvenience.
If you’re setting up payroll for the first time, our guide to setting up payroll for the first time covers the wider process beyond RTI specifically. For choosing software that handles submissions reliably, see our guide to the best payroll software for UK small businesses.
