Pay As You Earn rules are updated

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HM Revenue and Customs (HMRC) is updating the way it collects Pay As You Earn (PAYE) income tax to address inefficiencies in the system that result in 8m taxpayers a year paying the wrong amount of tax.

The authority said that “the current system doesn’t always work for customers whose circumstances change during the year.”

It added that the current system can take up to two years for an individual’s tax account to be balanced after an underpayment has occurred.

HMRC said that, while most taxpayers “won’t notice a change,” the overhaul will help ensure that any overpayments on monthly bills will be spotted sooner and those filing annual returns will pay the right tax “from the moment their circumstances change.”