CODING OUT TAX DEBT

News: September 2013

CODING OUT TAX DEBT

HMRC are looking to increase this activity, which involves the collection of tax debts by way of reducing your Code Number used when calculating PAYE deductions on earnings.

There would be no change to the current £3,000 maximum that can be coded out for individuals earning less than £30,000, and the current coding out limit of 50% of gross pay for a pay period would also remain. Indeed, HMRC also proposes to extend the current 50% K-code limit to all tax codes, so that employers and pension providers do not make tax deductions in excess of 50% of an individual’s relevant pay.

The main change proposed is to introduce a graduated, income-related scale for earnings of £30,000 or more so that a maximum of £17,000 could be coded out for a person with earnings of over £90,000

An increase in the maximum amount that can be collected under PAYE may be welcomed by individuals who would prefer to spread payment over a longer period. It is also true to say that some taxpayers do not want coding-out of self-assessment liabilities, but here as currently coding-out will be automatic within the new limits unless a positive claim is made not to use that method of collecting tax. We will ask which method you prefer if you find yourself with tax to pay outside of the PAYE regime; we will then make an entry in your tax return to show your choice.