The Treasury has scrapped plans to collect detailed employee working hours data through PAYE returns, citing concerns over regulatory burden and business costs. The proposal, initially set to begin in April 2026, has been abandoned as part of efforts to reduce red tape.
Employers will no longer be required to submit exact working hours as part of PAYE real-time information (RTI) reports. This decision spares businesses from an estimated £58 million in implementation costs for software upgrades and internal reporting changes, along with ongoing annual costs of £10m.
The Government initially proposed the plan in July 2022 to improve workforce planning and reduce tax non-compliance. However, businesses strongly opposed the measure, highlighting the complexity, cost, and administrative burden involved. In August 2023, the then-new Labour Government delayed the rollout from April 2025 to April 2026 before scrapping it altogether.
HMRC had acknowledged that collecting this level of data would be challenging. Many employees work across multiple sites, making it difficult for businesses to provide accurate reporting. Additionally, concerns were raised that such a requirement could infringe on individual rights and freedoms.
Following a consultation process, businesses reiterated their opposition, warning that the reporting requirements would necessitate costly software updates and create an administrative headache. In response, the Government decided not to introduce the Income Tax PAYE Amendment Regulations 2025.
A Government spokesperson stated: “We want business owners to focus on growing their businesses rather than spending valuable time on unnecessary administrative tasks.”
Dividend reporting requirements to proceed
While the PAYE hours reporting measure has been scrapped, new dividend reporting rules will still come into effect from 6 April 2025 under the Income Tax (Additional Information to be Included in Returns) Regulations 2025.
Under these regulations, personal tax returns must include details of directorships, close company dividends, and business commencement and cessation dates. These requirements will apply to individual, trustee, and partnership tax returns.
James Murray, the Treasury minister responsible for HMRC, reaffirmed the Government’s commitment to reducing tax administration burdens where possible.
He stated:
“As part of the prime minister’s Plan for Change, we are committed to freeing up business time and resources by removing unnecessary tax admin. Having listened to businesses’ concerns, we will not proceed with the PAYE hours reporting requirement.”
Despite this, the Government remains focused on increasing transparency around dividend income and corporate directorships, meaning individuals and businesses will still face new reporting obligations in the 2025/26 tax year.
Talk to us about your business.