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It’s coding time again, how fast the years fly by! It’s the time when you will be expected to read, understand and inform HMRC if they have got your tax codes wrong. This year HMRC tell us that their new computer system is now running at 98% accuracy. This is brilliant news and means that for most of us our tax affairs will be in order.

But hold this thought in mind….. There are approximately 35 million people paying their tax under the Pay As You Earn method (PAYE) and another 5 million paying by both PAYE and Self Assessment. If you quickly do the 
math you will see that 800,000 people will still have problems.

You got it… You still need to check your coding notices and statements carefully especially if you have multiple sources of income, have recently retired, been bereaved or had any change in circumstance.

Here are the 2012/2013 rates and allowances and reliefs (subject to the budget) to help you along your way.

Basic rate band (you will pay tax at 20%)                        0 to £34,370
Higher rate band (you will pay tax at 40%)                      £34,371 to £150,000
Additional rate band (you will pay tax at 50%)                 Over £150,000

Personal allowances
Age under 65                            £8105
Age 65 to 74                             £10,500   (Can be claimed at the start of the tax year if
                                                                   If income for the year is less than £25,400)
Age 75 and over                        £10,660   (As above)
Married couples allowance restricted to 10%                   £7705
This allowance is only available if one of you was born before 6th April 1935, it is restricted to 10% so you would expect to see half of this figure in your tax code £3853. You are able to share this allowance with your spouse and if you have done this check your coding notices very carefully.
Blind persons allowance            £2100
You do not have to be totally blind to claim this allowance but need to be registered with your local authority on the blind register (England and Wales). If you think you may qualify ask your doctor to refer you to an eye specialist. This allowance can also be shared with your spouse, if your own income is low it may be beneficial to do this.
All you have to do now is match this lot to your own situation. For example;
.
Mrs A is 63 is still working has deferred her state pension and doesn’t have any other income. She will have a personal allowance of £ 8105 before she pays any tax. Her code will be 810L which will be sent to her employer.
Mrs B also 63 receives her state pension £7105, has a works pension and a part time job. She has the same personal allowance of £8105 but her state pension which is taxable but can’t be taxed at source needs to be subtracted from her allowance, £8105 less £7105 leaving £1000. This will be sent to her pension as it is a continuing source as code 100L, as all of her allowance is used up any other income is taxed at basic rate (BR) 20%. Care has to be taken to make sure that income sources are large enough to operate the code.
This article is by TaxHelp for Older People (TOP) registered charity no 1102276, offering free tax advice to older people on incomes below £17,000 a year. The Helpline number is 0845 601 3321 or geographical 01308 488066