HMRC data collection payroll—what you need to know about RTI (2024)

The HMRC data collection payroll changes will affect companies up and down the country.

There are two major changes to payroll data collection on the horizon. In this article, we’ll explore both and what they mean for employers.

You’ll need to provide more detailed information about the way in which you record your employees’ working hours, the payments you make to them.

You’ll also have to change the way in which you tell HMRC about the benefits in kind that they receive. This includes benefits such as company cars.

In this blog you’ll learn about:

Changes to data collection being introduced by HMRC

According to HMRC, its changes to data collection will affect, “1.2 million self-employed businesses each year, 1.9 million PAYE-registered businesses including civil society organisations, and 900,000 businesses which include shareholders of an owner-managed business, who will be required to submit information to HMRC by 2026.”

Essentially, there are 3 main changes, affecting certain types of people.

First, shareholders in businesses that are owner-managed will have to provide the amount of dividend income that they earn from their own company separately from any other dividend income that they might receive from any other shares that they own. This will be done via their Income Tax Self-Assessment return.

Second, if you’re self-employed, according to the changes, you’ll have to tell HMRC about when exactly you started and ended your self-employment.

Rather than simply being voluntary, as it is now, self-employed people will be required to submit this information via their Income Tax Self Assessment return.

But it’s the third group that is most relevant here. RTI PAYE reporting has been in operation for over a decade. It means that as an employer you have to report to HMRC electronically any salary, or pension payments or Class 1A National Insurance Contributions (NICs) to employees before you make them. If you don’t comply, then you face a fine.

RTI (Real Time Information) and what it means to you

With RTI PAYE reporting, employers and pension providers also need to tell HMRC in their Full Payment Submission (FPS) about income tax and any other payroll deductions they’re making in real-time.

Under these new RTI PAYE arrangements brought in as part of the general HMRC data collection changes, as an employer you’ll also have to include information about your employees’ hours in your RTI PAYE returns.

HMRC is currently happy to accept more high-level information, in other words the banding of hours (A – D or E for “other”), and for you to include the actual hours worked on each employee’s payslip.

Some of the details of these HMRC changes are still to be finalised and announced. However, it has been announced that if your employees are paid based on an hourly rate, you’ll have to report the number of hours they’ve worked that determined the amount that you’ve paid them.

Unlike the case with the banding system, you’ll now need to reveal the precise hours that each employee has worked during a pay period, and, in certain circ*mstances, a description of the payments made.

• If you don’t have this information, then you’ll need to explain why you don’t have it.
• If you pay your employees based on a number of hours specified in their employment contract, you’ll have to report to HMRC how many hours the contract required them to work in the relevant pay period.
• If the payment you’re making doesn’t fit into either of these categories, then you should report the number of relevant hours as “nil”. You should then explain what the payment does represent instead.

This might be payrolled benefits-in-kind (see below), a taxable social security benefit such as statutory sick pay or payments made by staff who you pay on a piece-work basis.

According to the government:

“This measure will reduce administrative burdens for thousands of employers and HMRC by simplifying and digitising the process of reporting and paying tax on all employment benefits. It will remove the need for 4 million end of year returns to be submitted to HMRC.”

P11D and taxable benefits

The way that Benefits in Kind (BIKs) are taxed has also been earmarked for potential mandatory payrolling from 2026.

BIKs are essentially benefits that employees and directors receive that aren’t directly part of their salary. This might be a company car, private health insurance or gym membership.

Currently, you’re very probably reporting taxable benefits for any employee or director on a P11D form. This form must be submitted by 6 July following the end of the relevant tax year.

The information from this form is used to calculate the tax on these benefits that employees or directors need to pay. They’ll then pay that tax via a Self Assessment form or HMRC will collect it retrospectively through PAYE.

Alternatively, as an employer you can apply to HMRC to manage the tax liabilities of most, but not all, of these taxable benefits through your payroll on a regular real time basis. This means that, as the employer, you don’t need a P11D, but you still need to submit a P11D(b).

It’s this use of payroll rather than the P11D form to manage benefits that HMRC plans to make compulsory. The P11D will eventually become redundant, as you’ll be required to payroll BIKs in real-time monthly, or weekly if you have weekly paid employees.

What qualifies as a BIK for tax purposes and the precise details of the benefits to your employees or directors can be complicated. If you pay at irregular intervals the situation can also become quite complicated and some experts have concerns about the ease with which employers will be able to implement the whole payrolling of BIKs schemes, especially around timing.

According to accountants and tax consultants BDO:

“Employees could have 2 years’ worth of benefits on which tax must be collected in 1 tax year. While it represents a timing difference rather than an additional cost, this could represent a significant amount for some employees. Considering the level of benefits currently reported via P11Ds, it appears that this could be a widespread problem for employees in 2026/27 tax year.”

Final thoughts on HMRC data collection payroll changes and RTI

The new reporting requirements on hours worked will likely come into force from 6 April 2025, while a year later, April 2026, is the proposed date for compulsory payrolling of BIKs.

Both deadlines might seem far off, but it’s better to start taking action now rather than scrambling to get your systems up and running just before the new requirements come into force.

While HMRC is still to confirm both implementation dates and the finer details, we are committed to ensuring that the latest news is on Sage Advice, so make sure you sign up for the newsletter to be updated on any further information.

RTI payroll reporting software can help to speed up systems, improve accuracy and ensure that you’re compliant. Using tech like this also means that you and your colleagues can spend less time managing your payroll and more time focussing on growing your business and doing what you do best.