Tax Codings - Warning
Discussion
Many of you who complete Self Assessment tax returns may have noticed that the new PAYE Coding Notices currently being issued by the Revenue for 2006/07 contain substantial reductions on the basic code. The Revenue are trying to collect the Self Assessment tax liabilities for 2006/07 by means of inceasing the PAYE take from individuals rather than allowing them to pay the tax by cheque in the normal way. This may not be a problem for lots of taxpayers but, don't forget, the Revenue are not really entitled to collect the final element of the Self Assessment tax for 2006/07 until 31 January 2008. By doing it this way they are collecting the tax, in some circumstances, almost two years too early.
If you have been affected by this and do not want your coding adjusted, all you have to do is phone up your tax office and ask them to remove the adjustment off the coding.
>> Edited by Eric Mc on Tuesday 7th February 10:07
If you have been affected by this and do not want your coding adjusted, all you have to do is phone up your tax office and ask them to remove the adjustment off the coding.
>> Edited by Eric Mc on Tuesday 7th February 10:07
Tell me about it !! My wife recently recieved notification of a change in her tax code from 475L down to 184L !! Their explaination was that because we have income from rental properties they had deducted this amount from her personnel allowance to come up with the new tax code. After I complained on her behalf they have altered it back to 503L, although we are still awaiting the confirmation letter. Cheeky bast*ards !
I've already spoken to three separate tax offices this morning concerning this. Apparently, from now on, if your Self Assessment tax liability for any given year (as calculated by your most recent Self Assessment tax return)comes to £2,000 or less AND you also have a source of PAYE earnings, HMRC will AUTOMATICALLY collect the ASSUMED Self Assessment tax liability for the next tax year (currently 2006/07) by way of an adjustment to the PAYE Coding. This has a number of ramiifications.
The assumed SA liability for (say) 2006/07 is based on the most recent information available to the Revenue i.e. the SA Return for 2004/05. Therefore, they are making a huge assumption that your 2006/07 SA liability is going to be identical to your 2004/05 SA liability. That, in 99% of cases, will not be the situation. The very nature of SA income is that it fluctuates, quite wildly on occasions. The upshot of this is that your PAYE for 2006/07 will be completely wrong and the SA tax collected under the PAYE system for 2006/07 will also be completely wrong. The Revenue will not know the true situation for 2006/07 until the 2006/07 SA tax return is submitted, which could be as late as 31 January 2008. That means, if they continue on this path, that they will have to correct your 2008/09 PAYE Coding to correct for the corrections for the corrections - and it still won't be correct.
In other words, you will never, ever be sure what your true tax position is going to be for any given tax year as the tax code will always contain these estimated and assumed reductions in the coding.
The assumed SA liability for (say) 2006/07 is based on the most recent information available to the Revenue i.e. the SA Return for 2004/05. Therefore, they are making a huge assumption that your 2006/07 SA liability is going to be identical to your 2004/05 SA liability. That, in 99% of cases, will not be the situation. The very nature of SA income is that it fluctuates, quite wildly on occasions. The upshot of this is that your PAYE for 2006/07 will be completely wrong and the SA tax collected under the PAYE system for 2006/07 will also be completely wrong. The Revenue will not know the true situation for 2006/07 until the 2006/07 SA tax return is submitted, which could be as late as 31 January 2008. That means, if they continue on this path, that they will have to correct your 2008/09 PAYE Coding to correct for the corrections for the corrections - and it still won't be correct.
In other words, you will never, ever be sure what your true tax position is going to be for any given tax year as the tax code will always contain these estimated and assumed reductions in the coding.
Somehow I think not! Yes - they will do whatever you ask them to. The problem is that the TAXPAYER has to be pro-active to STOP the Revenue from doing something I don't think they should be doing in the first place.
I always tick the box on the SA return instructing the Revenue NOT to adjust tax codings as ameans of collecting tax arrears. However, that instruction has no influence over the Revenue adjusting codings in order to take tax from you IN ADVANCE of the normal due deadlines.
I always tick the box on the SA return instructing the Revenue NOT to adjust tax codings as ameans of collecting tax arrears. However, that instruction has no influence over the Revenue adjusting codings in order to take tax from you IN ADVANCE of the normal due deadlines.
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