The existing PAYE (Pay As You Earn) system was introduced nearly sixty years ago ensuring that correct deductions are made relating to pay and tax.
From 1st January 2019, this system for PAYE will undergo a long overdue update, but don’t worry, this update will benefit all involved – including employers and employees.
PAYE Modernisation will change how employers report their payroll information to Revenue. Every time an employee is paid a file will need to be submitted (electronically) to Revenue, consisting of all details of employee payments, deductions and leaver information. The contents will be similar to the current annual P35, but this file will be submitted every pay period (weekly, monthly, fortnightly, etc.).
The update will also allow employers to submit a new employee’s information before they commence employment with them. PAYE Modernisation / Real Time Reporting (RTR) will result in a reduction in the occurrence of year end over/underpayments of tax.
This new Revenue reporting system is anticipated to be fully integrated into payroll software. Fortunately, it is envisaged that the workload will not increase as a result of PAYE Modernisation.
An online statement will be sent before the start of the new tax year which will detail the employee’s tax credits and standard cut-off point (SRCOP). This will be based on estimated income and details available to Revenue.
Employees will be encouraged to make any adjustments to this online statement, including any claims for additional entitlements. This differs from the current system where an employee is required to wait until the end of the tax year to apply for any refund as a result of overpayment of taxes or to find out if there are amounts due to Revenue as a result of underpayment of taxes.
P60s will be abolished, employees will instead have access to their pay and tax record online, this will be updated on an ongoing basis throughout the year as they are paid. This will enable Revenue to carry out periodic reviews to identify if employees are utilising their tax credits and SRCOP to the maximum effect (e.g. where an employee has 2 employments) and, where applicable, employees will be prompted to reallocate tax credits and SRCOP.