More than 1,300 employers will participate in the HM Revenue & Customs (HMRC) PAYE Real Time Information (RTI) pilot by the end of September.
The RTI system will automatically update employee tax records, to ensure that workers pay the right tax and/or receive the correct benefits.
So far, 10 volunteer employers, including HMRC, have been piloting the system.
RTI is expected to go fully live for all employers in time for the October 2013 introduction of the government’s new Universal Credit System, which covers benefits.
HMRC believes that most employers will begin using the system from April 2013.
However, a recent report from the National Audit Office (NAO) on HMRC’s accounts warned that the department – with its history of large-scale IT failures - needed to “get a grip” if it is to successfully introduce a real-time PAYE system.
Stephen Banyard, acting director general for Personal Tax at HMRC, said: “RTI is on track and the pilot is going very well. We started in April with just 10 employers and now we’ve successfully received over 1.7 million individual records from 338 PAYE schemes.
“By the end of September, up to 1,300 employer schemes will be reporting PAYE in real time.”
A further expansion of the pilot is planned in November.