The current Pay As You Earn (PAYE) system has been around since the 1940’s and will be replaced by Real Time Information (RTI) in 2013.
With the current PAYE system HM Revenue & Customs don’t get to find out how much each employee has earned until the end of the tax year, when the employer submits form P35 ‘Employers End of Year Return’. This makes it difficult for HMRC to keep tabs on how much PAYE each employer owes each month, and often means that tax codes are based on out-of-date information.
However, this is all set to change with RTI which will involve employers sending HMRC an electronic report each time their employees are paid (i.e., weekly or monthly). These reports will be called ‘Full Payment Submissions’ and will contain the same information as form P35 but on a more regular basis.