Employers may have to refund tax to staff after increases in personal allowance

Employers may have to provide some employees with a tax refund following the government’s increase in the personal allowance to compensate for the withdrawal of the 10% tax band. The increase takes effect from 7 September and is backdated to 6 April. The usual procedure for employers is to fund any refunds out of other PAYE deductions by reducing their next payment to HM Revenue & Customs (HMRC). But if that next payment is insufficient to cover the refunds, HMRC has said employers can claim funding from it to cover the balance.