Many people do not realise the importance of checking PAYE coding notices; however you could be paying too much tax if your tax code is wrong.
At this time of year HMRC start issuing PAYE coding notices for the coming year. These are based on the recent 12-13 tax return submissions. If your circumstances or income have changed since then it is likely that the tax return will be inaccurate.
To help tax payers get their tax codes corrected HMRC has recently introduced a new email service which you can use to let them know that your PAYE code is wrong. This could save you a lot of time trying to contact them by phone.
Introduced into post war society, Pay As You Earn has led to employers acting as a tax collector for income tax, national insurance and even student loans. Bearing in mind the effect a tax code can have on an individual’s earnings, the importance of checking these is paramount – especially after the problems HMRC had back in 2010 with their PAYE computer systems and the ensuing mess that has followed for several years. As agents we no longer automatically receive PAYE coding notices from HMRC and we are therefore relying on well informed clients to forward these on to us to check.
Some of the more common adjustments you might find in a PAYE code are as follows: –
Car/Fuel Benefit
Medical Insurance
Child Benefit
Outstanding HMRC debts
State Pension
Gift Aid Relief
Pension Relief
For higher earners there are further problems. If you earn over £100k you will start to lose your personal allowances by £1 for every £2 of adjusted net income over the income limit. Therefore if your earnings hover around this threshold, or your salary fluctuates year on year, you may find that the allowances in your PAYE code fluctuate too. This could lead to a nasty shock at the end of the tax year, if you find out you have underpaid tax.
With the seemingly limitless amount of restrictions that can be included in tax codes it is imperative that these are checked by either the taxpayer or an agent. If you believe your PAYE code may be incorrect, or you require further information, please do not hesitate to contact one of the team here at Goodman Jones.
The information in this article was correct at the date it was first published.
However it is of a generic nature and cannot constitute advice. Specific advice should be sought before any action taken.
If you would like to discuss how this applies to you, we would be delighted to talk to you. Please make contact with the author on the details shown below.
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