Refresh of PAYE System Overview
The Pay As You Earn (PAYE) system is undergoing a refresh to simplify tax payments for individuals. Around 8 million customers pay the wrong amount of tax each year, with 5.5 million overpaying. The new system will use real-time data to adjust tax codes throughout the year, ensuring individuals pay the correct amount on their income. This change aims to offer more certainty, prevent tax debt and overpayments, and provide guidance for those facing financial difficulties. Simple Assessment and Drivers for Change are key components of this transformation, aiming to streamline tax processes and improve accuracy.
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Presentation Transcript
Drivers for change Around 8 million customers pay the wrong amount of tax each year 5.5 million pay too much tax The majority of those who pay too much are the lowest earners (under 15,000) Average overpayment is 450 45% of PAYE customers receive one or more tax code changes per year Those who don t pay enough tax typically earn over 20,000 It can take up to two years to rebalance tax
PAYE refresh will make tax simpler by using real time data to make adjustments to people s tax codes throughout the year, so they pay the right amount of tax on their income as they earn it. This is a positive change and will offer more certainty for people, helping avoid tax debt and overpayments Those who are not balanced at the end of the year will probably owe less than under the current system Gov.uk will be updated ahead of the changes and from June following implementation Customers facing financial difficulties can get help online or by phone Guidance and support materials will be available
Drivers for change Currently there is no legally enforceable way to collect PAYE debt Customers are sent 2 voluntary payment requests SA Xxx customers in Self-Assessment don t really need to be there Transferred to Self-Assessment if non compliant Moving towards the end of the tax return
Simple Assessment allows HMRC to make a calculation of Income Tax liability without the need for an individual to complete a Self Assessment tax return. This is a positive change and will allow customers to understand their tax liabilities Various payment methods Calculation will be based on information already held First affected are those with State Pension above Personal Allowance Another customer group affected will be those with underpayments that cannot be coded A single, simplified bill X
