PAYE Coding Notices
In July 2017, HMRC started to use information provided by employers to update employees’ PAYE coding notices more frequently. Called dynamic coding, the principle is that by adjusting an employee’s tax code for changes to their circumstance in-year, this should reduce the number and amount of under or over-payments of tax by the end of the year. More detail can be found in our technical article here.
Following feedback, HMRC have now revised the process as the year end approaches as follows:
“If a customer’s circumstances change between 6 January 2018 and 5 April 2018, and the amount of tax due in the current year is affected, HMRC will adjust their tax code but only start collecting the tax from 6 April 2018. This way customers won’t pay back too much tax in a short space of time. We will put in similar arrangements for future years too.”
After 5 April 2018, we expect the system to revert back to the principle that coding notices will be updated as HMRC becomes aware that circumstances have changed with a view to making any necessary tax adjustments over the balance of the tax year.
PAYE Settlement Agreements
PAYE Settlement Agreements (PSAs) allow employers to deal with certain benefits in a single report. They cover benefits which are minor, irregular (for example one-off relocation expenses over the £8,000) or impracticable to calculate for an individual employee (for example staff entertaining not covered by an exemption).
In September’s Employer Focus we wrote that we were expecting that certain changes would be made to the PSA system from April 2018. This included that it would no longer be necessary to agree with HMRC what expenses and benefits should be covered by the PSA in advance of the tax year, and that it would be possible to make PSA submissions and payments online.
HMRC have now issued draft legislation this month which sets out the following changes:
- The requirement to renew the PSA agreement each year will be removed.
- There will not be a digital process for PSAs from April 2018, although the proposed new legislation does make provision for the process to be made digital in the future.
While it is disappointing that there will not be a digital system, the removal of the annual renewal should be a welcome simplification for employers.
PAYE Service availability and issues
Remember you can check if the PAYE online service has any issues or there is any scheduled downtime here.
Guidance on Tax Codes to Use from April 2018
HMRC have issued their annual P9X document to help employers decide what coding notices to use for employees for the 2018-19 tax year. This includes how to uprate any general tax codes and deal with any coding notices for individual employees. The changes should be made after the final pay-run of the 2017/18 tax year, which ends on 5 April 2018.