HMRC announce real-time PAYE coding

HM Revenue & Customs (HMRC) has announced its intent to roll out real-time Pay As You Earn (PAYE) coding in time for the 2017/18 tax year.

Coinciding with the launch of Making Tax Digital, HMRC’s new and improved online tax system, this change will allow taxpayers to react to tax codes instantly so that they can pay the correct amount of tax.

The tax authority said they will use the information it holds and is supplied by employers and pension providers in a “more proactive way”, to ensure more customers end the tax year having paid the right amount of tax.

Real-time data usage will enable HMRC to change a customer’s tax code to adjust, correct, or collect any estimated underpayment. It said that this will mean more customers will end the tax year balanced.

It added that the new approach to coding is aiming to keep customer’s tax up to date “in-year”, so that more taxpayers pay the right amount of tax, and do not end the year with an under or overpayment.

HMRC has also told employers and pension providers to expect a higher volume of coding notices as a result of real-time coding.