... for real-time pain throughout the tax year?
HMRC has launched a pilot of Real Time Information (RTI) for PAYE. Under RTI, employers and pension providers will notify HMRC about PAYE payments at the time they are made, rather than solely at the end of the year. RTI will eventually support the operation of universal credit, the government's welfare programme that brings …
... for real-time pain throughout the tax year?
Pain for who?
- Employer hands over (your) PAYE tax monthly or weekly, lumped together for all employees and tracks how much was paid for each employee themselves.
- At the end of the year, Employer produces P60s, breaking down for HMRC the total paid for each employee. HMRC credits you with the tax paid (May take months to process)
Soon to be:
- Employer hands over (your) PAYE tax monthly or weekly, with a breakdown. Or even has a second payroll run, with your tax being credited directly to your HMRC "account", so no extra paperwork.
- HMRC has real-time record of your credits.
- The End
The only question in my mind is: Who thought the current system would be a good one?*
* I could be wrong about how it works, or there might have been an advantage in the days before businesses and HMRC getting computers. Feel free to enlighten me.
Couldn't happen to nicer people.
"For 'tis the sport to have the enginer hoist with his own petar; and 't shall go hard" - Hamlet
It's like HM Government doesn't trust me to add up my own taxes.
I'm a mathematician - I have a degree in it. I was self-employed for many years. Not once was I 100% sure that I'd filled in the tax return properly, when it was still using the paper returns.
Did I have masses of complicated tax law to contend with? No. I was paid X amount of money by clients and had ZERO expenses. I kept records and receipts for everything I was paid. I had no pensions, capital gains, bank interest on savings or anything else to worry about - just income. I could have claimed the occasional £2 on a bus fare or something ludicrous but the effort was just not worth it at all, so 99% of my tax return was little boxes marked "0".
The online system actually worked better, but still I couldn't say for sure that I was actually 100% confident that I'd typed in everything correctly and in the right boxes. I was confident I'd pass audit, should it ever happen, because my records were SO simple I could keep years-worth of them in one folder and not claiming any expenses meant that, actually, if anything, I forfeit some rebate for the sake of simplicity - erring on the side of caution. And all of my bank statements and the records of my client would tally perfectly.
When I did check with people who do tax all day, every day, they wanted me to make things ten times more complicated so that I could earn a pittance back in rebates. But they said that, if I didn't want that, then my returns were exactly what they'd have filed. So I didn't do anything "incorrectly", but it *NEVER* was clear that it was correct, at any stage, to a mathematician who could spend DAYS filing the simplest of returns with the simplest of incomes and records.
And one year, they made me pay several thousand pounds (that I didn't have) in tax in advance because "our projections show you'll earn that much next year". They'd refund it later, of course, because their projections were wrong and mine were right, but even so, I had to find several thousand pounds out of thin air, hand it to them for a year - interest-free - under threat of imprisonment, and then only get it back when they were proved wrong and they felt like filling out the paperwork. Their projections were out because the bottom fell out of the market, and I knew that, and had planned for that - so at the worst possible time they demanded lots of money that I didn't have. I had to take out a loan to cover it (and not go to prison), and then pay back MORE every month until my rebate came a year later.
The hassle of a tax return just isn't worth it. Even under an umbrella company, it's worth the commission just to have them sort out that junk for you.
I would have thought that was an argument *for* doing your own taxes. If someone with a degree in mathematics can't work out if their tax is correct, then how do you expect the HMRC drones (who in all likelyhood don't have a degree in mathematics) to get it right?
The tax system is severely broken when a single low end wage earner ends up paying more tax than a millionaire.
I'm not a mathematician; I don't have a degree in it. I have an accountant and he's tax deductable. He does this stuff so I don't have to care. Phew!
Coincidentally, I've also got a degree in maths, I'm self-employed and I don't claim my trivial expenses. And filling in a tax return really isn't hard. If your affairs are simple then there are about six boxes you have to put numbers into. What's the problem?
If HMRC ask for a payment on account for money you won't be earning, just tell them and they'll cancel it. If you do earn the money anyway they'll charge you interest. If you don't, there's no problem. I did this last year. You don't have to rustle up thousands of pounds from nowhere.
Would be great if the system worked :)
As it is I'm waiting to see whether HMRC will give me the rebate I'm owed for 2011-2012 or somehow add the earnings reported from my current employer, which includes figures HMRC gave them, back onto those same figures again, and demand money back instead. You just never know :/
Weekly tax codes combined with an employer who often forgets to do one week and then does two at once are also a big fail :(
Fix it. Fix it all. Now!
As someone who's had to do a number of PAYE refund requests I know the system quite well.
First, check http://www.hmrc.gov.uk/calcs/stc.htm to see if you are due a refund.
If you are still in employment with the same employer, when you get your P60 with the overpayment on it, ring 01355 359 022 and ask them to arrange a refund. If they give you the run around, request a form R38, then use that, with a covering letter and a print out of the tax checker calculation summary page linked above.
If you are no longer in employment with the same employer, just use form P50 from http://www.hmrc.gov.uk/pdfs/p50.pdf and send it to HM Revenue & Customs, Pay As You Earn, PO Box 1970, LIVERPOOL, L75 1WX.
If you don't agree with their decision, follow http://www.hmrc.gov.uk/factsheets/hmrc1.pdf *within 30 days*.
Thanks for that :)
My employer was waiting for a correction to the figures my previous employer had given them that were wrong. My previous employer sent the details to HMRC but HMRC told them they wouldn't send the correction onto my current employer and would handle any correction themselves :/
Checking the doormat every day...
I was self employed at one point and hated filling out the tax returns.
My problem with the whole tax system is that they just cannot get it right.
My tax code for 2011/12 was changed 8 times through out the year, and then they claim that I have paid the accurate amount of tax, but how can they be sure considering it changed so many times.
The other thing that annoys me about it is that, 1 person I work with is on the same wages as me, has the same company car etc same age but he pays less tax than me and our circumstances are the same, both of us have a girlfriend with no kid's etc but he pays less than me and the tax office think it's correct but I cannot figure out how it can be correct.
Allow people to opt out of PAYE and settle up at the end of the year. With the every changing tax laws, especially the loss of the personal allowance, makes things interesting. I know of people who earn under £100,000 but the PAYE system thinks they're over so they lose their tax free allowance until they can file a return the year after.
PAYE is about getting *employers* to administrate, and therefore bear the costs, of gathering income tax from their employees.
It's basically a tax on employers: do you really think HMG is going to give that up?
(The Vodaphone scandal aside).
and, for good measure, insist tax inspectors collect taxes in person,, in cash, direct from the taxpayer. Shouldn't take too many dead taxmen to show to goverment and public alike what a 'fair' level of take should be.
You might hate PAYE even more when you realise that you are simply an unwitting intermediary in the transfer of the end customers' money to HMRC. That this money is generally believed to be really paid by the employee is the greatest illusion of our times.
Consumers pay all taxes. Remember that, when you begin spending your hard earned cash.
If it is ANYTHING like the existing systems, it will be a TOTAL DISASTER. Then, presumably, the users will have to phone an 0845 number to get help - HA! HA! HA! HA! HA! HA! HA!
"Your call is important to us....."
"All our operators are busy at the moment...."
HMRC don't DO computers - they don't understand that these systems HAVE to work.
Currently - they DON'T!!!!!!!!!!
The current asynchronous system, of employers paying and deducting semi-random amounts each month, occasionally being told by HMRC to deduct different random amounts from that point on, then trying to balance it all up afterwards for each tax year, is stupid. "Tax codes"? WTF does HMRC have to invent new gibberish like "D0", "BR", "L8500"? The new system sounds like a huge improvement: they say "we are paying Fred (NI#AB12345C) £1500 this month", HMRC say "OK, pay us £700, pay him the other £1000" (because they like to pretend part of the tax comes from the employer), that should be the end of it.
No doubt they'll screw the pooch horribly, blowing billions on a system to get the answers wrong then billions more to fix it, but it's a nice idea.