A new code – will you pay the price?

13th April 2012

If you are an employee or receive a private pension, you are likely to have been sent a new tax code by HMRC recently. This will operate for the coming tax year, 2012/13 and takes account of the increased allowances announced alongside last November’s Autumn Statement.

HMRC Tax Code

In 2012/13 HMRC will be able to collect up to £3,000 of underpaid tax and/or overpayments of tax credits via your PAYE code. If your tax code was too high in 2011/12 – and HMRC have had their problems on this front – you could find yourself paying the price from April. In any event, it is always worth checking your PAYE code before filing it. HMRC rely on data, from your employer for example, which may be out of date or just plain wrong. If you have a company car, take careful note of what the taxable benefit is; the rules changed again from April and some of the resulting increases will be significant.

HMRC’s web pages offer useful guidance to the calculations of codes and what the end letters mean (see www.hmrc.gov.uk/incometax/tax-codes.htm).

PAYE codes are meant to make tax collection simple but, as ever, garbage in results in garbage out. If you don’t want to find yourself paying the wrong amount of tax, check your code.