Pay attention to tax codes
Most directors and employees will already have been issued a tax code for the 2023/24 tax year, and it is important to check the figures as a very large proportion of codes will be incorrect. If you’ve been subject to... Read more
Most directors and employees will already have been issued a tax code for the 2023/24 tax year, and it is important to check the figures as a very large proportion of codes will be incorrect. If you’ve been subject to an error, this could mean a future corrective tax bill.
A tax code will typically take into account allowances, allowable expenses, taxable benefits (those not payrolled) and untaxed income, so there is plenty of scope for error.
- Allowances: The code can often assume the incorrect level of income when it comes to the amount of available personal allowance.
- Allowable expenses: Deductions for subscriptions and professional fees will be based on what was claimed previously, yet these will invariably increase annually.
- Taxable benefits: For most benefits, HMRC will be unaware of any changes from the previous year.
- Untaxed income: Figures for bank and building society interest can be too high where, for example, an account has been closed.
A particular problem can be the use of an emergency code. These can be applied if there is a change in circumstances, such as:
- A new job;
- Taking on an additional part-time job; or
- Starting employment after being self-employed.
The emergency code is used because HMRC will often not receive the employee’s income details in time after the change. Although use of the code is temporary, it can cause a cashflow problem for the employee.
Those starting a new job should give the new employer their P45 as soon as possible. Those moving from self-employment should complete the starter checklist.
Checking and correcting codes
The easiest way a person can check and correct a tax code is by logging onto their personal tax account using their Government Gateway user ID and password. HMRC can be notified of any changes that affect the tax code, and employer details can be updated.
The starting point for checking or correcting a 2023/24 tax code can be found here.
Personal & Trust Tax Manager
More & Other MusingsView all related content
NEW Articles24 Nov 2023
As expected the Chancellors Autumn Statement again confirmed its ongoing Government support for the film and television sector. Inward investment by overseas streaming companies and studios has created thousands of new jobs in the UK and has been a major... Read more