Changes to PAYE in 2019
Making sure you stick to PAYE tax procedures is incredibly important if you own a business. This means staying up to date with any changes in the system. PAYE tax can already be a stress point without you having to worry about missing new rules and finding yourself with hefty fines.
However, in 2019 there are going to be some changes to the system that you need to be aware of. They are potentially the biggest changes to happen to PAYE, with employers reporting every time they pay an employee. We created this short guide to help you stay up to date and in HMRC’s good books.
When will changes come into effect?
HMRC are currently working on introducing changes to the system that will come into effect on 1st January 2019.
What changes will be made?
In what is being called PAYE modernisation, HMRC is planning to implement a ‘real-time’ reporting regime for PAYE. As an employer, you may have already received a letter about the changes, and now the deadline draws near. Instead of one P35 at the end of the year, you now have to report each time you pay an individual employee. From the 1st January 2019, payroll will need to complete the following steps:
- Inform HMRC of the total cash payments and taxable benefits made to each employee on an individual basis during each pay period.
- Get a Revenue Payment Notification (“RPN”) for each pay period which will contain all the information needed to be able to tax each employee accurately.
- Process the payments to employees and pay tax to HMRC.
- Report payments made and tax paid to HMRC for each employee.
These steps are a replacement of the current P30 system which previously required reporting on a cumulative basis as opposed to per employee. P35 will also no longer be needed.
Are you ready?
So are you ready for these new changes? On January 1st, can you be sure you can meet these new regulations?
If you have a payroll solution in place, you shouldn’t have to do any extra work. But if you aren’t sure, you need to think about how you will meet the main challenges of the PAYE modernisation. The main challenges are:
- Delays – It is common for payroll teams to experience delays when obtaining accurate payroll information from a range of sources. You will need to refine your processes to ensure you can meet PAYE regulations every pay period.
- Investment – You may need to update your payroll system, requiring some investment.
Most modern payroll software will be able to automatically communicate the relevant information with HMRC so, in the run-up to the deadline, you need to make sure you are using software that can refine your payroll processes, so you don’t end up with more work on your hands. Smaller businesses spend around 80 hours on their taxes which could be spent better elsewhere. Don’t let these changes weigh you down.