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80 Years of PAYE: The Evolution of Taxation

Did you know that today marks the 80th anniversary of the inception of the Pay As You Earn (PAYE) scheme? It´s true; the first deductions using this scheme were made today!  

Back in 1944, PAYE was introduced as a temporary measure to increase financial resources available for the Second World War. It was the idea of Sir Kingsley Wood, who served as Churchill’s Chancellor. But in a cruel twist of fate, he suddenly died on the very day the proposal was set before parliament in 1943, never witnessing its full implementation. 

The idea was a simple one: individuals earning over £100 would start paying their tax monthly as of April, instead of six monthly payments of an amount determined by the Inland Revenue. Employers were now responsible for tax calculation, deduction, and payment, resulting in funds flowing into the treasury earlier and aiding in the management of the national debt. 

What´s interesting is that even after all this time, this scheme is still temporary. Every year, it has to be approved by the Government – however, there is hope that one day they might just forget to renew it! 

Fast forward to today – and, in particular, the most recent budget announced – and any changes that have to be made are still the employers’ responsibility to calculate and pay over the correct tax. With so many other added complexities, such as National insurance and Pension deductions, each with their own unique set of ‘tax-free’ allowances, it is a good job that this scheme was computerised in 1984! This was a milestone marking 40 years of pivotal progress. 

At JVCA, we´re not just aficionados of historical tax trivia (thanks, Charlie!). We are a team of tax experts who support growing companies, helping them navigate the ever-changing tax landscape. Whether it’s aiding companies in meeting their payroll obligations, grappling with the intricacies of temporary taxes, offering tax planning advice, or helping business owners balance their PAYE and Self-Assessment responsibilities, we’ve got you covered.

Reach out today to find out more.

Special thanks to Charlie Tolley-Fletcher for writing this insightful blog post.

Email us: [email protected] 

Call us: 01234 752 566

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