Reactive tax codes
HMRC is about to start updating tax codes more frequently from April 2017.
This will help HMRC collect the tax due more quickly. Any underpayments of tax identified for 2016/17 will be collected through the 2017/18 tax codes. But the same tax codes will also be used to collect potential tax underpayments for 2017/18.
As a result, the employee could experience a double hit on their 2017/18 PAYE code, and pay more tax in that year. However, no employee should have more than 50% of their earnings deducted through PAYE.
As an employer, you will have to deal with more PAYE codes being issued for your employees, and it will be important to keep up with those changes. Employees should be advised to contact HMRC directly if they don’t agree with their tax code.