HM Revenue & Customs (HMRC) has released a list of priorities to allow for real time adjustments to taxpayer’s tax codes so that they pay the right amount of tax within the current tax year, as part of their ongoing Making Tax Digital (MTD) campaign.
The plans, which HMRC intends to implement in the 2017-18 tax year, will ensure that real time reporting of Pay As You Earn (PAYE) codes is available for all employers.
This will require a change to current HMRC practice, which will require them to use the information it already holds, as well as the data supplied by employers and pension providers through real time information (RTI), in a ‘more proactive way’.
If successful, more taxpayers will end the tax year having already paid the correct amount of tax and will not face a bill for underpayment or a rebate for overpayment.
The most significant change under the proposals will allow HMRC to easily change a taxpayer’s PAYE code to adjust, correct or collect any in-year underpayment.
Under the proposals those affected by PAYE will also be able to claim an in-year repayment and arrange for it to be paid into their bank account through their personal online tax account, which will be available to them under MTD.
HMRC plans to notify employers of code changes on a monthly basis, allowing them and their employees to make claims or pay tax if circumstances change. As a result of the changes employers and pension providers are also likely to face an increased volume of PAYE coding notices.
LINK: PAYE Guidance