HMRC are now sending out PAYE codes for the 2014/15 tax year.
They started in January with people who don’t file self-assessment tax returns and will continue in February and March. Now that the 31 January deadline for tax returns has passed, they can start sending out PAYE codes that are amended to reflect anything that was in your return.
Why does my tax return affect the PAYE code?
Rather than wait until the end of the year, HMRC will ask you to pay the tax monthly as part of the PAYE on your wages.
For example, if you had tax to pay on a rental property in your 5 April 2013 self-assessment tax return, HMRC will assume you’ll owe the same tax next year and will amend your PAYE code to collect this during the year.
The idea is that you’ll pay the tax as it happens, instead of having a bill next January. If the rental profit is different this year, you’ll either make a balancing payment or receive a refund when you submit the 5 April 2014 return.
I’ve received two codes – why’s this?
You may be sent more than one PAYE code if you have more than one job and/or pension. Usually, your tax-free allowance is allocated to one job and you pay tax on every penny you earn from the other source. If you’d like the tax-free allowance to split across the jobs, you can ask. We spoke to HMRC earlier to do exactly this for a client – their £10,000 tax-free allowance was being allocated to a job that won’t earn enough to use it all, so they’d be paying too much tax during the year.
I haven’t received a new PAYE code – should I be worried?
No – if your circumstances haven’t changed, you may not receive a code. Your code will simply be amended automatically to reflect the increase in personal allowance – it’s £9,440 in the current year and will increase to £10,000 from 6 April 2014.
I’ve got a code and I don’t understand it – what do I do?
If you’re registered for Self-Assessment online, you can view the code and the workings.
Alternatively, just ask us and we can explain it to you.
If you would like to arrange a free meeting with a Liverpool accountant to discuss personal tax, either at our office or at your premises, please contact us on 0151 724 3960 or by email at [email protected].
Alternatively, you can use our website contact form.
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Added by Jon Davies