Consultation outcome

(Draft) Statutory Instruments impacts: improving the data HMRC collects from its customers

Updated 28 January 2025

Who is likely to be affected聽

Shareholders in owner-managed businesses, the self-employed, employers, tax agents, tax, or payroll software providers.聽聽聽

General description of the measure聽

These draft statutory instruments will require businesses to change the information they provide to聽HMRC聽via both income tax Self Assessment and real-time returns completed by employers.聽HMRC聽is implementing 3 specific new requirements via regulations. Firstly, employers will be required to provide more detailed information on employee hours worked via Real Time Information (RTI)听PAYE听谤别辫辞谤迟颈苍驳.

Secondly, shareholders in owner-managed businesses will be required to provide the amount of dividend income received from their own companies separately to other dividend income, and the percentage share they hold in their own companies via their Self-Assessment return. Finally, the self-employed will be required to provide information on start and end dates of self-employment via their Self-Assessment return.聽

Policy objective聽

The objective is to improve the quality of the data collected by HMRC to provide better outcomes for taxpayers and businesses, as well as improving compliance, resulting in a more resilient tax system.聽聽

The additional data聽HMRC聽will collect is in areas where taxpayers already hold the data or provide it on a voluntary basis through the tax system.聽For employee hours, for example, employers whose contract specifies a number of hours will only be required to provide the hours stated in that contract for the relevant period, and any additional extra paid hours of overtime.聽

Background to the measure聽

The government published a consultation in July 2022 proposing a number of potential options for improving the range of data HMRC collects, uses, and responsibly and safely shares across government.聽聽聽

The government published a summary of responses to the consultation in April 2023 setting out plans to progress less burdensome options where customers already hold the data or provide it on a voluntary basis through the tax system.聽聽

These 2 statutory instruments are being laid by聽HMRC聽with the objective of improving the quality of the data collected by聽HMRC聽to provide better outcomes for taxpayers and businesses, as well as improving compliance, resulting in a more resilient tax system.聽

Detailed proposal聽

Operative date聽

The Regulations will have effect from no earlier than the start of the tax year 2025 to 2026.聽

Current law聽聽

Under paragraph 21 of Schedule A1 to the Income Tax (Pay As You Earn) Regulations 2003 (PAYE Regulations), employers are required to submit this data to HMRC바카라 사이트痶hrough the RTI return in the form of bands related to the number of hours (A to D). For workers on zero hours contracts, or anyone else without regular working patterns, employers can select a fifth band, E), for 바카라 사이트榦ther바카라 사이트�.聽聽

Proposed revisions聽

The Income Tax (Pay As You Earn) (Amendment) [(No. ***)] Regulations 2024 will be introduced with effect from April 2025聽聽

The Regulations amend Schedule A1 to the Income Tax (Pay As You Earn) Regulations 2003. Regulation 2(2) replaces the existing information requirement at paragraph 21 of Schedule A1 with 2 new requirements. The first is that the number of hours the employee has worked in respect of the payment, determined in accordance with paragraph 21 as substituted, must be included in the return. The second is that, in certain cases, a description must be reported in relation to the payment.聽聽聽

The Income Tax (Additional Information to be included in Returns) Regulations 2024 will be introduced with effect from April 2025.聽聽

The regulations specify additional information which taxpayers are required to include in certain tax returns which they may be required to make and deliver to HMRC. Regulation 2 requires the inclusion, in personal returns, trustee바카라 사이트檚 returns and partnership returns, of the dates of commencement and cessation of business activities. Regulations 3, 4 and 5 require the inclusion, in personal returns, of information concerning directorships, close companies and dividend income.聽聽

Summary of impacts

Exchequer impact (拢尘)听

2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029
NIL	NIL	NIL	NIL	NIL	NIL

This measure is not expected to have an Exchequer impact.聽

Economic impact聽

This measure is not expected to have any significant macroeconomic impact.聽聽聽

Impact on individuals, households, and families聽

The measure has no impact on individuals as it only impacts on businesses. There is no impact on family formation, stability, or breakdown.聽

Equalities impacts聽

It is not anticipated that there will be additional impacts on those in groups sharing protected characteristics.聽

Impact on business including civil society organisations聽

This measure is expected to have an estimated impact on up to 1.2 million self-employed businesses each year, 2.0 million PAYE-registered businesses including civil society organisations, and around 0.9 million directors of owner-managed businesses, who will be required to submit information to HMRC by 2025.聽聽

Self Assessment requirements will predominantly impact on small businesses, whilst PAYE requirements will impact on all businesses with average costs per business higher for large businesses.聽

One-off costs will include familiarisation with the new requirement, staff training and updating software or internal processes.바카라 사이트疭ome continuing costs will arise from businesses keeping records of relevant information and providing information to HMRC of any relevant changes.바카라 사이트�바카라 사이트�

Better understanding of customers바카라 사이트� circumstances helps to improve customer experience, enhancing interaction with HMRC, by reducing unnecessary enquiries, and ensuring HMRC can better understand their circumstances when contacted.聽

Estimated one-off impact on transitional Businesses costs (拢尘)听

	One-off impact	(拢尘)
Costs	Dividends paid to shareholders in owner-managed businesses	拢9尘
Costs	Start and end dates of self-employment	negligible
Costs	Employee hours	拢58尘
Savings	바카라 사이트�	바카라 사이트�

Estimated continuing impact on Administrative Burden (拢尘)听

Continuing average annual impact	(拢尘)
Costs	Dividends paid to shareholders in owner-managed businesses	拢9尘
Costs	Start and end dates of self-employment	拢0.6尘
Costs	Employee hours	拢10尘
Savings	바카라 사이트�	바카라 사이트�
Net impact on annual administrative burden	바카라 사이트�	+拢19.6尘

The employee hours estimate is based on assumptions about data employers are already required to keep, to satisfy National Living Wage and National Minimum wage rules, and how easy it would be to include that data in the regular RTI submission process they already follow. Most PAYE-registered businesses affected by this measure will incur one-off costs of adapting processes to submit their RTI data and small ongoing costs. 聽

Operational impact (拢尘) (HMRC or other)听

HMRC will implement a series of IT changes to support safe delivery of these 3 elements of enhanced data collection. These changes are currently estimated to cost between 拢5 million and 拢6 million overall to deliver. This figure is expected to fall once delivery commences and IT requirements are refined.聽

Other impacts聽

No other impacts have been identified.