Tomorrow sees the biggest shake up of PAYE in nearly 70 years with the introduction of HMRC's Real Time Information (RTI) system.

Under RTI, employers report to HMRC each time they make a payment to employees, rather than via an annual return. Real time reporting starts from an organisation's first payday on or after 6 April.

For businesses with fewer than 50 employees, filing just once a month under the RTI system will be acceptable for the first six months of RTI, but after 5 October 2013 this 'relaxation period' will end and they will then have to report in line with everyone else.

For those with over 5,000 employees, HMRC is giving personalised 'landing slots' to bring them into the system gradually.

Lisa Turner, senior payroll manager, Intuit UK said: 'The introduction of Real Time PAYE will affect almost every employer in the country, regardless of the company's sector or size. My one piece of advice to them would be to keep calm and carry on - but make sure you've got the correct processes in place in good time. You have time to get used to the new system and there is a lot of free support out there, from HMRC to software providers that can advise employers on how to make the change as pain-free as possible.'

HMRC is offering free software for employers with nine or fewer employees, regular live Twitter Q&As, YouTube videos and roadshows across the country.

Ellie Gamble, employment tax associate director at Grant Thornton said: 'Business owners need to bear in mind that their operation and payment of PAYE is about to become more transparent to HMRC, so it's important that they ask themselves if they are doing everything right. Clearly this change is going to be onerous and could put real pressure on payroll teams. The message to businesses is clear: do not rely on your software provider to make this work.'

There will be penalties under RTI for late or incorrect returns, although HMRC has confirmed that it will not impose penalties for late returns for the first year of RTI. However, it has reserved the right to look for penalties on incorrect returns from the outset.

David Gauke, Treasury secretary, said the new approach was designed to 'bring PAYE into the 21st century.'

'For employees, particularly the 1m people in the UK with multiple jobs, RTI will bring benefits as HMRC starts to get details of their tax every time their wages are paid, rather than just once a year. This will make HMRC's records more accurate and up-to-date and will reduce the number of cases where someone is found to have under or overpaid tax during the year,' Gauke said.

The target is to have all employers filing in RTI by 6 October 2013 - the date on which universal credit, the new benefit system, will start.

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