25th February 2020
As I wrote in a blog post earlier this year, Making Tax Digital (MTD) and Real Time Information (RTI) are beginning to have a noticeable and positive impact on managing tax issues on behalf of both my personal and corporate clients.
But having just completed the annual truck load of self-assessment tax returns in January, I am already starting to see the result of those trickle through in the form of payroll and personal tax changes.
Whilst I had picked up on the speed with which in month income changes were being reflected, over the last 12-24 months, this new pace of change is something to behold.
Pre RTI, significant changes to one’s circumstances or one-off dollops of income, such as bonuses or commission could take months or even an entire year to be reflected in tax codes, credits and rates, but these now seem to be almost instantaneous. For example, in the middle of 2019, an individual I was processing the payroll for received a bonus as part of their salary. The following month their working tax credits had adjusted to reflect this new, assumed, annualised income. When the salary returned to normal levels, the working tax credits changed again.
Another example was a recent in-year cessation of a benefit in kind, in the form of a company car. The lease ended in December and we notified HMRC immediately, with the date the vehicle was handed back. By the middle of February, the Director had received a new coding notice for the remainder of that tax year. Historically, it would have taken the next tax year to iron out any under/overpayments.
So, whilst I previously wrote about the ease with which I can now engage as an agent with HMRC and resolve issues, the fact that we are approaching a genuinely real time tax calculation environment, may mean those issues become fewer and further between and require less management.
Now if we could just ensure their computers got it right every time….