The introduction of real time information (RTI) was supposed produce more accurate employee PAYE codes, but that benefit hasn’t materialised so far.
However, from July 2017 HMRC will start to use the RTI data to update employees’ PAYE codes on a month by month basis. Employees may see more deductions in codes for 2017-18 as this will be a transitional year.
Any tax underpaid for 2016-17 will be recovered alongside any remaining tax underpayments due for 2015-16.
Note that no more than 50% of a person’s pay can be deducted through PAYE, so large tax underpayments may have to be carried forward or assessed separately.
HMRC will encourage employees to access their personal tax account online through GOV.UK to understand the changes to their PAYE code, rather than ask their employer. Employees can also query their tax code through their personal tax account and request changes if they think the code is wrong.
