HMRC to implement pay coding adjustments

HM Revenue & Customs (HMRC) has announced it will introduce changes to enable the reporting of PAYE in real time as part of its ‘Making Tax Digital’ programme.

The changes will be brought in in time for the 2017-2018 tax year but employers will only see a difference in the volume of coding notices they receive. This is likely to go up, as HMRC will have to change codes more frequently. However, they will still only receive notifications of code changes on a monthly basis.

The bulk of the changes will all be on HMRC’s side, as they will need to alter their current practice. This includes using the information the department receives from employers and pension advisers provided through real time information (RTI) in a “more proactive way”. As the Revenue says, this is just to ensure that more customers pay the correct amount of tax.

According to HMRC, the first phase of using real time data will enable them 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.

By this, the taxman means that a customer’s tax will be completely up-to-date in-year, so that they pay the correct amount of tax and do not end the year with either an overpayment or an underpayment.

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