Aimed at improving the accuracy of the PAYE process and reducing HMRC costs the introduction dovetails with the Universal Credit welfare system being introduced that will calculate benefits based on real time earnings information.
David Gauke, exchequer secretary, has stated that the changes will save £300 million worth of administrative burdens from employers, mainly from the abolition of the end-of-year PAYE return process.
"RTI will ensure that the PAYE system meets the needs of the 21st century. It will improve the service to taxpayers by making it easier to ensure that people pay the right tax after a change of job," he said.
"HMRC is committed to a smooth and on-time transition. The start of the pilot today demonstrates that RTI is on track."
HMRC was heavily criticised in 2010 after millions of people were sent tax demands due to incorrect calculations obtained from its PAYE system. It has confirmed that it is one of the 10 test employers to use the new system allowing a first-hand experience on how it is working from an employer's perspective."