In 1960 Revenue introduced the PAYE system. This system was designed for employees and employers to have the most accurate, up to date information relating to pay and tax deductions. Ensuring the right tax deductions are made by the right individuals at the right times, improves the accuracy, understanding and transparency for all the stakeholders. This version of the PAYE system has been used for the past 60 years but for not much longer…
On the 1st of January 2019, the PAYE system will get a long overdue update to evolve with the times. For example, people switch job more regularly and changes in personal circumstances ( i.e marital status) are much more common compared to when PAYE System originally launched
Now you are probably wondering what do these changes mean for me. Don’t worry, this update will benefit both employers and employees.
Before the start of the tax year, an online statement will be sent detailing your tax credits and standard cut-off points for the upcoming year. This will be based on estimated income and information available to Revenue for the employee. Employees will be prompted to make any necessary adjustments to or to update this online statement, including claiming any additional entitlements. This contrasts with the current system where the employee must wait until the end of the year for such reconciliation and wait for any refund or be faced with a tax underpayment.
This update will have changes on how employers pay their employees. When processing payroll, a file must be submitted (electronically) to Revenue containing details of employee payments. The contents of this file will be like the details currently submitted in the annual P35, but unlike the P35 this file must be submitted each pay period e.g. weekly or monthly.
The update enables employers to submit a new employee’s detail before they start employment their details. This allows the final payroll run in the year will generate a pre-populated statement setting out the total tax deductions for the year both at the level of the employer and the employee. This, in turn, should reduce incidences of year end over/underpayments of income tax.
This new reporting process by employers to Revenue is anticipated to be fully integrated into the employer’s payroll run and will result in a significant modernisation of business processes and reduce the administrative cost for employers.
To discuss these changes further Contact us