HMRC have decided to start using RTI data to amend tax codes as part of their new initiative called “PAYE Refresh”, which comes into effect from the 2017-2018 tax year.
The main reason for HMRC starting to use RTI data to amend tax codes is because they have estimated that approximately six million taxpayers in the UK currently do not pay the right amount of tax through the PAYE system.
In response, HMRC now intends to make better use of the taxable pay income that it already holds to more accurately update tax codes more often, to do this they will be using the information they have already been receiving about various types of taxable income via RTI for a considerable period of time.
A recent government document confirms that from April 2017 the government will start using the data they have been getting for years via RTI to more frequently adjust tax codes.
This is positive news for the approximately six million tax payers who have under or over paid tax, as the government will now be adjusting tax codes up or down more frequently to make sure the right amount of tax is collected using RTI data via the new “PAYE Refresh” initiative.
The not so positive news is that the more frequent adjustment of tax codes will mean the individual will likely be getting a lot more notifications (via their Personal Tax Account or P2). Additionally, somewhat similar notifications will have to come to the employer via the P6.
Further, more frequent adjustment oftax codes mean, likely, more paperwork for employers. It is important to note that HMRC does recognise that, for many employers, P6’s “flow automatically into their computer systems”, however, there are many employers out there that do not have automatic flows in place. It’s worth noting that at CPS, with our in-house software, P6’s flow automatically into our systems from HMRC.
To ease the understandable tension many employers and employees will have regarding these more common tax code changes, and to reassure both parties, HMRC has stated that;
For employers, tax codes will not be issued more frequently than they are currently used to.
For workers, HMRC have stated in discussions that they will not be changing a worker’s tax code more than once per month.