Her Majesty's Revenue & Customs (HMRC) launched its Real Time Information pilot with ten employers today.
HMRC said RTI will make it easier for pension providers and employers to administer Pay As You Earn (PAYE).
RTI will mean providers and employers report PAYE payments to HMRC as and when they are made, not at the end of the tax year.
All employers will use RTI by October 2013.
"RTI will ensure that the PAYE system meets the needs of the 21st century," a spokesperson said.
"HMRC is committed to a smooth and on-time transition. The start of the pilot today demonstrates that RTI is on track.
"RTI will remove administrative burdens of £300m a year from employers, mainly from the abolition of the end-of-year PAYE returns process; the biggest single contribution that any tax change could make."
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