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Is your tax code correct?

With another new tax year fast approaching, HMRC have begun to issue tax codes to employers and employees for the coming year.

It is important that you check these codes as they are generated automatically from HMRC’s database and will be based on historic information. As these codes are automated, they do not always take account of any changes advised to them throughout the year.

This invariably leads to errors which could result in large underpayments of tax if HMRC are not alerted immediately.

If you receive benefits in kind, claim reliefs or receive untaxed income, HMRC will be working on your tax return and/or P11D submissions for 2011-2012.

If your circumstances have changed, you should check your tax code carefully and contact HMRC if you believe the information they hold is out of date.

Furthermore, if you are in receipt of more than one source of income (i.e. a pension alongside your employment), it will take HMRC time to associate the records. This may mean you are receiving too many allowances in the year which could again result in large tax liabilities.

Failure to obtain allowances for higher rate tax relief for personal pension contributions or subscriptions to professional bodies are also common areas highlighted by a review of codings.

If your earnings exceed £100,000 and personal allowances are being withdrawn, this is another area where codings need to be carefully reviewed and errors are common.

Currently, HMRC do not issue copy tax codes to accountants automatically which means that unless your accountant actively pursues HMRC for tax codes on a regular basis, they will not check them as a matter of course.

If you believe  your tax code is incorrect and would like advice on this or on any other tax issues, please contact Christine Wallwork (christine@in-accountancy.co.uk) for assistance.

 

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