UK taxpayers got a real bombshell last Saturday — they learned that the Pay As You Earn (PAYE) information has to be reported in real time. This is done by the employer, so you might not be aware of how this affects you. We wanted to chime in with the changes, what you need to do (if anything), and anything that you might want to keep an eye on.
Most employees in the UK will not have to worry much, as the employer has the burden of managing real time compliance, not you. You just have to make sure that you show up to work every day like normal. Not too hard, right? Well, we guess it depends on your boss
The PAYE system is designed to make sure that everyone pays their fair share, with employers deducting not just the income tax but the National Insurance contributions as well. Waiting at the half-year and annual mark to collect taxes could allow some people to slip under the radar, and we can’t have that if we want to a solid country.
The new change is that employers have to report PAYE income tax stuff to HMRC in real time, but what does that really mean?
Simply put, it means that they have to notify HMRC as soon as possible rather than just waiting annually to report the information. These days, employees are all over the place. They’re moving around and changing jobs much faster than they were in 1944, when the system first came out.
This is something that’s going to essentially affect employers and accountants that service that market. Every time an employee is paid, the details of that payment have to be sent to HMRC. This is done through payroll software to keep the process very quick.
It is expected to strike businesses that have less than 50 employees the hardest, because they don’t have as much time to prepare. According to the Forum of Private Business, one in five business owners responded that they were not prepared at all.
For employers, getting the basic information correct has become more important than ever before. The easiest mistake to overlook: date of birth. From there, you also want to have the correct National Insurance number. Making sure that benefits will be paid to the right employee is very critical to the success of all underlying programs. Good luck!