HM Revenue and Customs has warned employers that changes to the Pay as You Earn (PAYE) system are imminent. It has written to employers reminding them that from this year, they must file their Employer Annual Returns online by the 19 May deadline – there will no longer be a paper filing option for small employers with fewer than 50 staff. Also coming in May are the changes to the PAYE penalty system. Employers who fail to pay tax, National Insurance contributions, Construction Industry Scheme deductions, or Student Loan deductions in a timely fashion may be fined. For late monthly and quarterly payments, the penalty will start at 1 per cent of the late amount and will increase to 4 per cent depending on how many times payments are late. Employers may not have to pay a penalty if only one payment is late in any tax year, unless the payment is more than six months late. HMRC may charge penalties of 5 per cent of the amount that is late on any monthly or quarterly payments: A further 5 per cent may be payable if the payment has still not been made after 12 months.