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From April 2015 HMRC is increasing the amount of overdue tax it can recover through a taxpayer’s Pay As You Earn (PAYE) tax code.

Before 6 April 2015 HMRC can collect debts of up to £3,000 by adjusting a taxpayer’s PAYE code.

This applies if the taxpayer owes money to HMRC and:

  1. the taxpayer is an employee paying tax through PAYE and/or
  2. the taxpayer receives a taxable UK based private pension.

From 6 April 2015 this ‘coding out limit’ will increase from £3,000 if the taxpayer’s PAYE earnings are £30,000 or above. HMRC will apply a sliding scale to the taxpayer’s main PAYE income as follows:

Annual PAYE earnings                                     Coding out limits

Up to £29,999.99                                                £3,000

£30,000.00 to £39,999.99                                   £5,000

£40,000.00 to £49,999.99                                   £7,000

£50,000.00 to £59,999.99                                   £9,000

£60,000.00 to £69,999.99                                   £11,000

£70,000.00 to £79,999.99                                   £13,000

£80,000.00 to £89,999.99                                   £15,000

£90,000.00 and above                                        £17,000

The taxpayer will continue to have the option not to have the debt collected through their PAYE tax code. Then the tax would be payable on the normal due dates.

HMRC has details of this change on its website.

Article shared from ACCA In Practice