PAYE celebrates its 80th birthday!
PAYE celebrates its 80th birthday!
It will be 80 years ago this year since the introduction of PAYE.
When PAYE was introduced, it meant that tax was collected on a weekly and monthly basis rather than twice a year for anyone earning over £100!
So, on 6 April 1944, PAYE was introduced to streamline the tax collection process from employee earnings. Many women had stepped into roles left by men who had gone off to serve in the Second World War and the sudden growth in the workforce meant the number of people paying tax increased.
The new PAYE tax replaced annual or twice-yearly tax collections, with PAYE being deducted by employers from either weekly or monthly wages.
Due to the increased frequency of tax being paid and recorded, it also meant an employee leaving work would be given a P45 recording his or her tax code number, pay to date and tax paid to date to pass on to a new employer.
Ahead of the new tax legislation coming into effect, HMRC – or the Inland Revenue as it was in 1944 – had to code employees so the correct tax was deducted from their salary.
By the end of January 1944, 15 million people, those earning more than £100 a year – equivalent to £5,666 in today’s money, had received notices telling them their tax code number.
Today, more than 30.5 million people pay income tax and National Insurance through PAYE, and employers share payroll information with HMRC in real-time.
A historian was quoted as saying: ‘In post-war Britain, PAYE became a crucial bit of infrastructure, laying the foundations for building the nation’s economy. And it is testament to the success of this piece of legislation that today in 2024, it is still an integral part of the tax system, 80 years later.’
80 years on – Taxpayers can access their own tax information via the HMRC app, a tool that was inconceivable 80 years ago. You can use the app to find and save your National Insurance number, check your tax code and income, or use the tax calculator to work out take home pay after income tax and National Insurance deductions.
Also…. don’t forget to file your self-assessment tax return by Friday 31 January to ensure you do not end the month with an automatic £100 penalty.
Please get in touch today if you would like to a quote for your self assessment from Kennedys Accounting – we are here to help.