10 Chartered Accountants
Book a call... we'd like to hear from you...

News

HMRC dynamic coding causes issues for taxpayers
15 September 2017

From July this year, HM Revenue & Customs (HMRC) has been utilising its new system of dynamic coding, which allows for in-year adjustments (IYAs) of a person’s tax code.

Under the new regime, codes can be adjusted by the Revenue to reflect sudden changes in an employee’s circumstances as soon as HMRC becomes aware of the changes, rather than waiting to reflect this in the following tax year.

In order to make the IYAs, HMRC relies on two important concepts, estimated pay and trigger points, to calculate the new code.

Estimated pay is effectively a person’s annualised year to date pay and this is used to perform the calculations to arrive at the new tax code. The same procedure is used for monthly paid employees, but based on average monthly income.

However, the PAYE code will only be amended if employers notify HMRC of a trigger point, where an employee’s circumstances have changed.

This could include an individual changing their personal tax account, or an employer notifying the Revenue of a change, which will typically take place during a payroll report or through a number of different forms.

Bonuses and one-off payments must be included in an employee’s estimated income for the year. However, many are finding that current payroll software does not contain a facility to tell HMRC that a payment is a one-off, which has led to the misinterpretation of payments.

In response, the Institute of Chartered Accountants in England and Wales (ICAEW) is warning employees and employers to check their tax code where a bonus or one-off payment has been made to ensure it doesn’t cause unwarranted restrictions of personal allowances or overpayments of tax.

LINK: HMRC’s guidance on tax codes

Other recent news

Working 9 to 5? It’s an unusual way to make a living
17 September 2018

The archetypal 9am to 5pm working day might be so…
Read more

Documents reveal HMRC plans to secretly access bank account information
10 August 2018

Documents published online have revealed HM Revenue…
Read more

Tens of thousands of fake HMRC websites taken down
10 August 2018

Figures published by HM Revenue & Customs (HMRC)…
Read more

HMRC collects more than £30 billion worth of extra tax in last financial year
10 August 2018

New figures from HM Revenue & Customs (HMRC)…
Read more

MTD for VAT clarified in new communication from HMRC
10 August 2018

HM Revenue & Customs (HMRC) has finally issued…
Read more

« »

Case Studies