Spread your tax burden over the year

It was grim day in parliament when the payment deadline for Self Assessment tax was set just one month after the Christmas holidays!

However an olive branch has been extended as from 6th April you will now be able to request underpayments of tax be taken out of your monthly income via a simple adjustment to your PAYE tax code, spreading the tax burden throughout the year.

Rules allowing for the coding-out limit to be increased in respect of tax debt have been published. They are the Income Tax (PAYE) (Amendment No 4) Regulations 2014 (SI 2014 No 2689).

As announced in the 2013 Budget, the maximum amount HMRC may recover through a taxpayers PAYE notice of coding ranges from £3,000 to £17,000, depending on the expected earnings of the employee (see table).

The new graduated scale will apply for the 2015/16 tax year.

The changes will be applied to unpaid self assessment and class 2 National Insurance debts and tax credit overpayments.

The Revenue says it will notify taxpayers in advance of the amounts that will be deducted from April 2015, the same date from the start of the overriding limit to prevent employers from deducting more than 50% of workers pay.

Annual earnings (£) Coding-out limit (£)

Less than 30,000 3,000

30,000 – 39,999.99 5,000

40,000 – 49,999.99 7,000

50,000 – 59,999.99 9,000

60,000 – 69,999.99 11,000

70,000 – 79,999.99 13,000

80,000 – 89,999.99 15,000

More than 90,000 17,000

An additional point to take from this is to check our PAYE code. If the code is wrong, then you could end up with unexpected tax liabilities at the year end.

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