The new and improved real-time Pay As You Earn (PAYE) coding system will soon launch a facility to notify employers when they are operating different tax codes for employees to the ones held on HM Revenue & Customs’ (HMRC) system.
The change, announced in the tax authority’s latest employer bulletin, will help workers pay the right tax on income as they earn it.
According to the document, the new trigger will notify employers about discrepancies between tax codes and help reduce the number of customers receiving unexpected tax bills at the end of the year, which can be time-consuming for both the employee and employer to correct.
The employer may change the tax code to the right one without approval from the worker to switch them to the correct code sooner. However, workers should be referred to their Personal Tax Account to make them aware of the change.
HMRC advises that if a customer’s financial circumstances change between 6 January 2018 and 5 April 2019 and the amount of tax due in the current year is affected, the revenue will adjust their tax code but only start collecting the tax from 6 April 2019 to make tax changes more manageable for the customer.
As a result of these upcoming changes, employers and pension and payroll providers may receive more tax codes in the months after the facility goes live.
The real-time PAYE coding system was introduced after research revealed that around eight million customers underpay or overpay their tax each year, with some tax accounts taking up to two years to be restored.
The new system is expected to go live in the coming months. Be the first to know by following Grunberg on Twitter.