Dynamic coding is here; HMRC is now using Real Time Information (RTI) data from employers to recalculate employees’ tax codes. The RTI feed will be used to estimate earnings when a tax code review is triggered, for example when a new benefit in kind is notified. Where HMRC calculate that the new tax code will under collect tax for the remainder of the year an in-year restriction will be included in the tax code, aimed at collecting that estimated underpayment in the current year. HMRC will also use other third party information, for example, from other government departments, with the aim to improve the accuracy of tax codes in-year and reduce the number of end of year underpayment and overpayment reconciliations required every year. Indeed, we are seeing aggressive coding adjustments in relation to estimated investment income even when asked not to via the self assessment return.
A key part of dynamic coding is that there are ‘trigger points’ for starting a review of an employee’s tax code. Trigger points are effectively notifications of change in circumstances. These can be a new employment, new benefit in kind, or perhaps an increase in salary. If HMRC are notified of details of a new company car, a tax code review is triggered and the tax code will be amended to include the benefit-in-kind that will arise in the tax year.
Date: 20th March, 2018
Articles from this Author
Contact Business Service Partners
Choose from the drop down menu below to select a Partner to contact.
We have a new opportunity in our Milton Keynes office for an Audit Apprentice click on the link to apply… twitter.com/i/web/status/1…
For the latest Mercer & Hole news, visit our LinkedIn page mercer-&-hole