Check Your PAYE Code, Now!
Now is the time to check your PAYE code if you are an employee or a private pensioner because there’s only a short time to get any mistakes corrected.
There is some confusion. A lot of people don’t actually know what PAYE, is even though they know what the letters mean. How many times do you hear people say: “I’ve paid my tax under PAYE.” But, it isn’t is a tax.
At best, PAYE is a relatively crude method of collecting “some tax”. Mainly the tax that people pay under PAYE is what they should pay. But also, fairly often, it isn’t. The minute that you add complications to the mix, problems can occur and you either pay too little or too much tax. Which is why HMRC are increasingly reviewing PAYE tax deducted and sending out tax bills or tax refunds.
Sometimes both of these can be wrong because people do not check their tax calculation sent to them. It wrong to think “HMRC have sent this to me so it must be right”, but thousands of people do just that.
Here’s a list of common situations that can make your “PAYE”go wrong:
- Employment benefits in kind not being reported or reported too late
- Not telling your employer if you have a Student Loan
- Not following up a P45 when you change jobs
- Getting a bonus – HMRC may then restrict your tax allowance if they think it’s a pay rise
- Not claiming fixed rate expenses like uniform allowances or professional subscriptions
- Changing a company car, especially when you “upgrade”
- HMRC including other income in your tax code, like bank interest and rental profits.
- Having more than one job-some tax allowances can go unused or are duplicated!
Act on PAYE Now to Avoid Disappointment
For 2018-19, there is still time to get the tax code adjusted in time for the next payday but as we move closer to March, the opportunity may recede especially if your employer runs their payroll in the middle of March.
For 2019-2020 HMRC will soon be issuing tax codes starting from the new tax year 6 April 2019 and the best option is to get it right from the outset.
If you get a private pension, check the PAYE Code for that too. If you have a job but are already getting State Pension, check that the restriction in your PAYE code is as per your State Pension for 2019-2020.
Read the Notes on the Coding Notice, called a “P2”.
So, There’s a Problem, What Next?
Once you’ve discovered an error it is advisable to phone the tax office. Have your National Insurance number and Employer PAYE reference ready because you will be asked for this.
The number is 0300 200 3300. Be prepared to wait, because one wait is far better than writing in, as it will take far too long to get a reply assuming you even receive one. If you do speak to HMRC, make sure you take a detailed note of what is said, and make sure the code is changed as promised.
What if HMRC or the Employer didn’t handle PAYE properly? If this has happened, the tax year may have already ended. You might get a tax demand or an unexpected bit of tax to pay when you do your “Self-Assessment” tax return.
In those circumstances, by concession, it may be possible to get out of paying, but the rules are pretty complex and it may be prudent to get advice from your accountant or give us a call if you don’t have an adviser yet.