This week HMRC released a discussion paper on potential improvements to the pay-as- you-earn (PAYE) system. It states: "Under centralised deductions the employer would send the gross payment through the electronic payment system to a central calculator where the deductions calculated by HMRC would be made automatically. The resulting net payment would then be sent to the individual's bank account and the deductions would be paid directly to the Government."
It suggests employers will be required to provide HMRC with information about income and deductions for each employee. HMRC will hold this information in a consolidated tax account for each member of staff, including details of their personal tax allowances and other reliefs. It will then use a calculator to work out tax and student loan deductions.
