HMRC is considering plans to overhaul the PAYE system with a view to moving to a ‘real time’ PAYE regime. Under the proposed system employers paying electronically would send HMRC details of employees’ pay and deductions of tax, NIC and student loan repayments together with information about the payees’ identities. This would be for all employees, including those from whose wages the employer is not required to deduct any tax, NIC etc. HMRC would then deduct national insurance payments and income tax, as well as any student loan payments, before payments are made into the employees’ bank accounts. Once the system is successful payslips would no longer contain any information about tax deductions, and employees would instead have a central tax account that they could view online.
HMRC believes that real time information approach to earnings and tax deductions could make significant improvements to the systems for tax, tax credits and welfare and benefit administration besides providing the opportunity to radically simplify the processes when people change jobs.
