BUSINESSES have just eight weeks to prepare for the biggest overhaul to the pay-as-you-earn (PAYE) tax system in almost 70 years, HM Revenue and Customs has warned today.
The tax authority said it will be writing to almost 1.5m employers from this week to remind them of the new real-time information (RTI) system replacing year-end tax returns from 6 April.
Under the new system, businesses will have to tell the revenue about payments made to employees at the time they are made – in real-time rather than at the end of the tax year.
The scheme is designed to cut down on over- and under-payments of income tax and reduce the number of errors in the PAYE when workers change jobs.
Lin Homer, chief executive of HMRC, said: “Business costs will be cut by £300m a year, employees are taxed more accurately and fraud and error in the tax credit system will be reduced by hundreds of millions of pounds every year.”
RTI will also eventually support the government’s universal credit programme that will replace existing benefits including jobseekers’ allowance and income support replaced with one single benefit paid monthly.