Enter Your E-mail

Your tax code determines how much tax is deducted under PAYE. You should always check that your tax code is correct as errors may result in too much or too little tax being deducted. Revised codes are sent out automatically after a Tax Return has been submitted and these essentially assume that taxpayer’s circumstances remain the same. This may not be the case. For example if you declare untaxed interest on your Tax Return, the auto coding process will assume that you have this income in the following year and adjust the code accordingly. If this is not the case, you will find that you have more tax deducted under PAYE than you need to.

HMRC may also adjust the code to collect tax on savings income. This may be easier than paying it at the end of the tax year, but is not for everyone. You do not need to have this collected through your code. Instead you can ask HMRC to take the savings adjustment out of your code and pay the tax under the self-assessment system. This will increase your take home pay each month.

Where an individual’s income is over £100,000 the personal allowance is reduced by £1 for every £2 of income above £100,000. Where HMRC expect the allowance to be abated on the basis that the previous year’s income was in excess of £100,000, they will take away the personal allowance from the tax code. If your income is likely to be less than £100,000 you can ask that they readjust the code, rather than waiting until you do your Tax Return to claim a repayment. This will provide a cash-flow advantage.

If you do not think your code is right or it includes items that you would rather were dealt with via self-assessment, you need to contact HMRC. They should amend the code.

Example:
Darren has a company car. In April 2015 he changed his car to a more environmentally friendly model.

As replacement cars do not now need to be notified to HMRC on form P46 (Car) (although employers can provide HMRC with this information online if they want to), HMRC may not be aware of the change until his P11D for 2015/16 is submitted by 6 July 2016.

Darren’s tax code for 2015/16 is based on his previous car and consequently Darren pays more tax than he needs to each month as a result.

By checking his tax code and telling HMRC about the change, he will have more take-home pay each month.