HMRC to roll out real time PAYE coding adjustments by 2017

As part of Making Tax Digital, HMRC has set out the priorities for its plans to make near real time adjustments to taxpayers’ tax codes so they pay the right amount of tax within the current tax year

HMRC plans to introduce these changes in time for the 2017-18 tax year. The PAYE system is not changing as such, but a number of changes will be introduced to ensure that real time reporting of PAYE codes is available. This requires a change in  current HMRC practice to include:

• HMRC says it will use the information it holds, and supplied by employers and pension providers through real time information (RTI), in a ‘more proactive way’ to ensure more customers end the tax year having paid the right amount of tax
• the new approach to coding will aim to keep the customer’s tax completely up to date in-year so that more taxpayers pay the right amount of tax and do not end the year with an underpayment or overpayment.

The first phase of HMRC using real time data will enable HMRC to change a customer’s tax code to adjust, correct or collect any estimated in-year underpayment that arises as a result of a change to the their tax code. This means more customers will end the tax year balanced.

PAYE customers using their personal tax account will be able to claim an in-year repayment and arrange for it to be paid into their bank account.

However, HMRC does not plan to notify employers of code changes any more frequently than on a monthly basis.

The only change for employers and pension providers will be the volume of coding notices is likely to increase because HMRC will have to change codes more often. It is hoped that the new system will mean that more taxpayers will pay the right amount of tax each year, without having to face year end bills or in some instances, refunds.

Original Post by Accountancy Live