Changes To PAYE Tax Collection Unveiled

HM Revenue & Customs have released details of upcoming changes to the pay as you earn (PAYE) tax system. Coming under fire for recent discrepancies, HMRC had already stated it wanted to modernise the collection of income tax and National Insurance so they have more relevant tax information regarding each pay cycle. Under planned changes, employers will send information about tax and other deductions when they pay an employee, instead of the end of year Form P35 employee summary and Form P14 Individual Employee Payroll Deductions Record. With more real-time information, the Revenue will be able to more accurately calculate benefits and tax credits as they will know the exact earnings for each employee for each of their pay cycles. Income tax adjustments via tax codes will be more accurate and quicker too. The Exchequer Secretary to the Treasury, David Gauke, stated the this change will allow a progression toward the Universal Credit - where much faster updates can occur to information about claimants' finances. Additionally the cost to administer payrolls for firms can be lowered by integrating the monthly payroll runs with submission to HMRC, rather than collating information at the end of the tax year. The overhaul to the PAYE system should be implemented by October 2013.