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Automatic PAYE Tax Code Adjustments

HM Revenue and Customs are planning to use information now available from Real Time Pay As You Earn to make automatic PAYE tax code adjustments through the year, rather than waiting until the end of the tax year.

Automatic PAYE Tax Code Adjustments

Designed to help millions of individuals pay the right tax at the right time, this should dramatically reduce the number of over and under-payment corrections needed at the end of every tax year.

This is part of HMRC’s work to transform the tax system (as set out in Making Tax Digital at the Autumn Statement 2015) and was originally to have been introduced in May. However, HM Revenue and Customs announced that they wanted to do more development testing to ensure that they provided the best experience when it started and as result the new system went live at the beginning of July.

What this means for you?

As an Individual?

As an individual, you will be sent a new tax code notification at the point when HMRC know your circumstances have changed, rather than at the end of the tax year. They will continue to send a copy direct to you and then another copy to your employer or pension provider so they can activate the new code.

Automatic PAYE tax code adjustments should improve the tax system to the point where you no longer pay too much tax through the year when your circumstances change, and will hopefully see the end of unexpected tax bills at the end of the year.

What do I need to do?

No system is perfect, so if you receive a new tax code from HMRC it must be checked to make sure that it has been updated using accurate information.

You can, of course, check the code yourself, on your personal online tax account. HMRC have issued recently updated guidance at to help you understand your tax code.

However, the easiest and most effective way to check that automatic PAYE tax code adjustments have been applied correctly is to send a copy to your tax advisor at Rawlinsons, so they can review the revised code on your behalf.

As an Employer?

As HMRC move to the new system, employers and pension providers are likely to receive more tax codes, but still on the batched basis that they currently operate. They advise that it is important that the new tax codes are implemented as soon as possible.

HMRC expect that in the short term you may receive some employee enquiries relating to tax code changes as customers get used to the new system. If you are unsure how to deal with any of these queries, please contact Rawlinsons for advice.

Longer-term, however, HM Revenue and Customs expect that you should experience reduced contact from your employees regarding under or overpayments of tax.

What do I need to do?

If you are concerned how automatic PAYE tax code adjustments may affect you or your employees, please contact your tax or payroll advisor at Rawlinsons on 01733 568321, who will be happy to help you.

HMRC have also provided guidance and support packs for employers and these are available online, including webinars. Please read