Commencing from 5 April 2017, HMRC will use information received from employers and pension providers via RTI to change PAYE codes to collect any estimated in-year tax underpayment.
At present tax codes tend only to be changed by HMRC to reflect updated benefits in kind, such as company cars or private medical cover.
No one likes to receive an unexpected tax demand after the end of the tax year and so in some ways this change is welcome.
However we can see that this may result in an unexpected drop in net pay for employees if HMRC ‘decide’ to make an adjustment, which may be difficult to manage.
It is not clear when employees will be notified of any changes to be made and whether this will leave them with sufficient time to react. We are told that employers will be notified of changes only on a monthly basis, which could put the onus on them to inform employees of any significant changes before they run the payroll.
Watch this space for further details.
For more information, please contact Lesley Sutton on 01484 550037 or email firstname.lastname@example.org.