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Consultation – collecting unpaid tax through PAYE codes

HMRC is consulting on changes to the coding out of tax underpayments, as part of its efforts to improve collection.

Currently HMRC can collect through code numbers tax payments due of up to £3,000.  The limit applies to all taxpayers, regardless of their income.  HMRC would like to be able to collect larger debts through PAYE from those with higher earnings.  The proposed graduated scale is as follows:

Annual PAYE earnings    Coding out limit
Less than £30,000     £3,000
£30,000 to £40,000     £5,000
£40,000 to £50,000     £7,000
£50,000 to £60,000     £9,000
£60,000 to £70,000     £11,000
£70,000 to £80,000    £13,000
£80,000 to £90,000     £15,000
More than £90,000     £17,000

The new limits would come into effect in 2015 and apply to debts as well as self-assessment tax underpayments.  Taxpayers would still be able to advise HMRC that they did not want a tax underpayment coded out but would have to propose a way of paying the outstanding tax that is acceptable to HMRC.

For low income taxpayers HMRC proposes to have a limit so that employers and pension providers do not make tax deductions in excess of 50% of an individual’s relevant pay.



Date: 7th August, 2013
Author: Cathy Corns


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