Currently, the paper-based PAYE system means that employees have both their income tax and national insurance contributions (NICs) deducted at source by their employers. Although HMRC provides individual tax codes, it’s up to the employer to calculate the amount due. The Tories are now looking at changing this by introducing a new automated bank-based system that would automatically deduct tax and NICs directly from employees’ gross pay, as it’s paid into their accounts. The new system could save businesses up to £5.5bn, say the Tories, and could increase revenues to the taxman by £1bn. “The cumbersome system is a significant burden for employers, HMRC and taxpayers,” says David Gauke, shadow treasury minister. “We urgently need to look at moving to a real-time PAYE system where income tax and NICs are deducted automatically as gross salaries are paid.” It’s understood that the Tories are in talks with several technology providers who are developing the system. “The PAYE system has been creaking at the hinges,” says Mike Warburton, tax partner at Grant Thornton. “British companies have been used as unpaid tax-collectors for years, which can be a big weight for smaller companies. This could go a long way to helping many companies.” A Conservative briefing document says the administrative burden on businesses – especially small businesses – would be “significantly reduced” under the new system. “Employers will no longer need to calculate the various deductions for employees and will simply need to ensure that the correct National Insurance Number is associated to the payment.” Related articles:Small firms’ tax anger as HMRC deadline loomsTax burden could lead to more departures Picture source
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.