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HMRC proposes tax code delay

HMRC has proposed changes to PAYE legislation which would mean it could wait up to 30 days before telling employees their tax code has changed.

The Revenue said that having discretion about when to inform taxpayers about changes to their tax codes will help it improve its service.

Under the proposal HMRC will be able to delay sending letter to employees telling them about a change to their tax code for up to 30 days after their employer has been informed.

“This will help ensure that HMRC can send the notices at times when it is best able to respond to enquiries from employees and will be used only in limited circumstances [for example] around self assessment or tax-credits renewals deadlines, when customers may find it harder to contact HMRC about their coding notice,” an HMRC spokesman said.

“Where this happens, the employer will still be informed immediately of any change and if a customer requests a tax code we will issue one.”

In 2010, millions of people paid the wrong tax because of errors in PAYE tax codes.

Baker Tilly has criticised HMRC’s proposal, saying that it would be best to let employees know in case errors occur.

“Surely telling employees first would be the way to try and get things right before under- and over-payments of PAYE arise?,” said Lesley Fidler, employee benefits director at the accounting firm.

HMRC is consulting on its proposal until 3 August. It hopes to introduce the new legislation in the autumn.