HMRC are changing the way they issue HMRC PAYE tax codes for employees with effect from end of May 2017. PAYE tax codes will now be issued every time there is a change to an employees’ circumstances that affect their tax.
From the end of May 2017, HMRC will be using the real time information (RTI) that’s submitted from your Sage Payroll Software at the end of each pay period to make any necessary changes to your employees’ PAYE tax codes. Previously, if an employee had changes to their circumstances that affected their tax throughout the tax year, HMRC would assess this at the end of the financial year. If the employee then had paid too little tax or too much, HMRC used to issue a new tax code to correct this for the following tax year. Therefore it could take up to 2 years for an employees tax code to stabilise!
Starting from May this year, HMRC will now assess the RTI information for each pay period and if changes are needed, they will send the new tax code straight away rather than waiting until the year end.
HMRC are hoping that these changes will make sure employees are paying the correct amount of tax during the current financial year.
If you would like to learn more about why HMRC are making these changes please feel free to visit their website.
What does this mean for our company’s payroll?
This means that if an employee’s circumstances change, HMRC will send you and your employee a tax code change notice at that point. You will then need to update the employee’s tax code right away to make sure they pay the right amount of tax.
If your employees have any queries regarding their tax codes they can use their online personal tax account to view any changes to their tax code and information on how their tax code is calculated.
Where in Sage Payroll will I get this information?
Tax code notices are sent straight to your HMRC Mailbox within Sage Payroll. In order to view tax code changes and apply them in your Sage 50 Payroll you can view this handy video from Sage: