Is it smart to stop PAYE?

Uriziel

Normally people pay tax every month via PAYE however I heard that you can remove yourself from PAYE and do your own tax return at the end of the tax year which means you can earn interest on the tax.
Is it this something people would consider smart? How common is this? Are there any problems with doing this?

Dazed_and_C0nfused

Uriziel said:

Normally people pay tax every month via PAYE however I heard that you can remove yourself from PAYE and do your own tax return at the end of the tax year which means you can earn interest on the tax.
Is it this something people would consider smart? How common is this? Are there any problems with doing this?

Where did you hear this?  From a friend down the pub?

Hattie627

Uriziel said:

Normally people pay tax every month via PAYE however I heard that you can remove yourself from PAYE and do your own tax return at the end of the tax year which means you can earn interest on the tax.
Is it this something people would consider smart? How common is this? Are there any problems with doing this?

I don't think you are allowed to opt out of PAYE on employment earnings but I may stand to be corrected on this. I imagine that, if allowed, millions of people would end up in serious debt to HMRC by failing to retain enough funds to pay their tax bill at the end of the tax year. Government revenues would be seriously compromised, to say nothing of the personal bankruptcies and other disasters which would ensue.

sonofmerton

I've seen it once before. Some woman wanted to opt out. The company allowed it. She was still liable for NI and Tax at the end of the year though. She was back under PAYE the following year. I don't know what her reasons were though for doing it in the first place. 

Flugelhorn

Uriziel said:

Normally people pay tax every month via PAYE however I heard that you can remove yourself from PAYE and do your own tax return at the end of the tax year which means you can earn interest on the tax.
Is it this something people would consider smart? How common is this? Are there any problems with doing this?

I think it comes down to whether people are employees or self employed - if you are an employee you have more rights but also the employer is obliged to deduct money from you and pay the taxes 

I had mixed employment for several years - some employed with PAYE and some sessional / locum - saved all the untaxed stuff in my offset account and took chunks off the mortgage.

Problems - you have to be organised and not spend the money before you have paid the tax man. Had a couple of friends doing the same, one of them used to forget that some of it hadn't been taxed and there was something of a crisis when the self assessment form went in.  Also if you do this for too long with one employer HMRC consider you employed

Qyburn

Hattie627 said:

I don't think you are allowed to opt out of PAYE on employment earnings 

You might be technically "allowed" but it would be unusual for an employer to agree. If they did, and HMRC had any difficulties collecting tax then the employer would be liable.

I suspect this is social media "Freeman on the Land" or conspiracy theory. Like those who claim you can "deregister" your car and drive without tax, insurance or licence. (You can't by the way, not even if you claim you're "travelling" rather than "driving".) 

masonic

Even if you are on self-assessment your UK earnings as an employee will still be taxed at source. It is however useful if you have income from savings and investments that you do not want to be taxed via changes to your tax code.