NEWS

New System for PAYE Code Changes

From July 2017 HMRC will start to use real time information to update employees’ PAYE tax codes on a month-by-month basis.

According to HMRC this change in procedure will:

• Offer more certainty to employers and their employees
• Reduce the instances of unexpected tax bills arising
• Ensure that more employees end the tax year having paid the right amount of tax

Up to now, where an employee’s circumstances change any adjustments are dealt with after the tax year end whereby tax codes are adjusted for any underpayments in a subsequent tax year.  Under the new procedure, once HMRC are aware of any changes in circumstances, they will amend the individual’s tax code and follow it up with a notification of the amendment to the employee.  A copy notification will also be sent to the employer.

Employees may see more deductions in codes for 2017/18 as this will be a transitional year.  Any tax underpaid for 2016/17 will be recovered alongside any remaining tax underpayments due for 2015/16.

It should be noted that no more than 50% of a person’s pay can be deducted through PAYE so any large tax underpayments may have to be carried forward or assessed separately. 

26/07/2017