Newsletter

PAYE tax codes

HMRC are issuing PAYE tax codes for 2011/12. These new coding notices, which are due to be issued between January and March 2011, will be used against employees pay from April 2011 onwards. It is important that these coding notices are checked carefully and HMRC have provided the following links to help individuals to check their codes. However if you are unsure that your coding notice is correct and would like some further guidance please do get in touch.

Good news for many

The majority of taxpayers will see an increase in their tax code as the personal allowance for those under 65 increases from £6,475 to £7,475.

Those individuals with simple tax affairs (just one employer with no reliefs or benefits or tax underpayments brought forward) will generally not receive a coding notice. Their current coding of 647L will be automatically uplifted to 747L following general instructions to employers.

Although the personal allowance is increasing the point at which taxpayers start to pay the higher rate of 40% tax on their taxable income is decreasing (from £37,400 to £35,000). This will remove the benefit of the personal allowance increase for some taxpayers.

A new concept of withdrawing the personal allowance for those with adjusted net income over £100,000 was introduced in 2010/11 and will continue for 2011/12. The reduction in the allowance is by £1 for every £2 of adjusted net income above the income limit. Adjusted net income for these purposes is broadly all income after adjustment for pension payments, charitable giving and relief for losses. Individuals with adjusted net income of at least £114,950 will not be entitled to a personal allowance for 2011/12.

Internet links: HMRC guidance on tax codes HMRC news



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