Changes scheduled for 6th April 2015 will allow the tax office (HMRC) to collect tax debts more aggressively.
Currently, HMRC can collect tax debts of up to £3,000 by adjusting your Pay As Your Earn (PAYE) tax code. This is known as “coding out”. Deductions for unpaid taxes taken through the coding out system allows HMRC to collect underpayments in self-assessment, overpayments of tax credits or PAYE underpayments.
There will be an increase in the maximum annual deduction through PAYE tax code adjustments from £3,000 up to £17,000.
The maximum level of deduction will be related to PAYE earnings, with taxpayers earning less than £30,000 retaining the old limit of £3,000 and taxpayers earning more than £90,000 being subject to the revised maximum of £17,000. The changes will only apply to under paid self-assessment, class 2 national insurance debts and tax credits overpayments.
It will work on a sliding scale, the salary bands and their respective tax code adjustment limits are as follows:
| Annual PAYE Earnings | <£30k | £30k-£40k | £40k-£50k | £50k-£60k | £60k-£70k | £70k-£80k | £80k-£90k | >90k |
| TAX Code Adjustment Limit | £3k | £5k | £7k | £9k | £11k | £13k | £15k | £17k |
Changes will be reflected to the 2015/2016 tax code. Taxpayers will need to be vigilant around any changes to their tax code as, although guidance requests HMRC to write to the taxpayer before the tax code changes are made, the changes will be made without their or their employer’s consent.
If this raises any concerns for you, please discuss with HMRC directly at the earliest opportunity in order for mistakes to be rectified or a payment arrangement to be agreed.
If this has been of interest and you would like more information on how we can help you, please contact our office on 01253 899989.
