© Crown copyright 2017
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: firstname.lastname@example.org.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/issue-briefing-changes-to-our-paye-tax-system/helping-customers-pay-the-right-amount-of-tax-on-time
Pay As You Earn (PAYE) is the way HMRC collects income tax from around 41 million customers. On average, around 8 million of these customers currently end the tax year having either over or under paid tax.
We are modernising the tax system to offer far more certainty for taxpayers, and to help people pay the right tax on their income as they earn it.
Why we’re making the changes
The current system doesn’t always work for customers whose circumstances change during the year:
- around 8 million customers underpay or overpay their tax each year
- two-thirds of these customers (5.5 million) overpay tax, of which just over 50% are the lowest paid, earning under £15,000 a year
- the current system can take up to 2 years for an individual’s tax account to be balanced after an underpayment has occurred
These improvements will stop most people paying too much tax during the year or getting unexpected tax bills at the end of the year. They will now pay the right tax at the right time.
How it will affect customers
The vast majority of PAYE taxpayers won’t notice a change.
However, millions of customers, who are our lowest paid, will pay less tax on a monthly basis by the end of the tax year because we will catch any overpayments sooner and prevent them from building up.
A smaller number of customers, who previously would have had an unexpected bill at the end of the year, will pay the right tax from the moment their circumstances change, so they will be able to manage their tax payments better.
If a customer’s circumstances change between 6 January 2018 and 5 April 2018 and the amount of tax due in the current year is affected, HMRC will adjust their tax code, but only start collecting the tax from 6 April 2018.
No customer has to do anything unless prompted to do so.
If there is a change which affects a customer’s tax HMRC will send them a tax code change notice, along with instructions on what to do. This will explain the change, and encourage them to use their online personal tax account if they need more information or further support.
In their personal tax account they can view any changes to their tax code, learn more about how their tax code is calculated and access help and support if needed.
What we’re doing to protect vulnerable customers
We will do all we can to ensure that no customer is disadvantaged by these improvements. Anyone facing difficulties will receive the extra support they need once they have contacted HMRC. This includes the option of spreading their tax payments over a longer period.
HMRC staff will point customers to the support available if they suspect someone might need help.
How we’re supporting those who are unable or unwilling to go online
For those who can’t go online there will be other ways to work with HMRC, such as telephone and home visits as appropriate.
Our Needs Extra Support service, launched in 2014, provides support to those in need through dedicated call handlers and a team of mobile advisers.
Customers will also be able to nominate a Trusted Helper – either a friend or relative – to manage their affairs on their behalf, and agents will continue to have a key role in supporting their customers’ use of online services.
What it means for employers
As we move to the new system, employers and pension providers could receive more tax codes, but still on a batched basis as we operate now.
Regular PAYE RTI submissions will continue unaffected, and it remains critical that employers submit accurate data on time.
What HMRC is doing to support employers
HMRC has been discussing these changes with employers since August 2016. We have produced guidance and support packs, and will continue to update agents and employers to make sure they are prepared for the new system.
To find out more
Read more about our modernisation plans.
To access your personal tax account go to gov.uk/personal-tax-account.
It takes just a few minutes to get started. You’ll need your National Insurance number and a recent payslip, P60 or passport to sign-in for the first time. Join the millions of taxpayers already using their personal tax account, and sign-in today.