Reviewing your PAYE coding notice is vitally important to make sure you’re being taxed correctly; if not you may be due a tax refund.
PAYE stands for Pay As You Earn. This is the standard method for deducting Income Tax & National Insurance from your wage/salary or pension before you receive it. It was introduced in 1944.
What is a PAYE coding notice and why is it important to keep it up to date?
HMRC calculate your tax code from the information that you and/or your employer provide. From this they issue you with a PAYE coding notice (called form P2). This shows what your tax code should be and how they have calculated it. They sometime may issue more than one PAYE coding notice in a tax year. It is important to look at each one.
Employers and pension providers can then work out how much Income Tax to deduct from your pay or pension each month. If you have the wrong tax code, or an outdated one, you may well be paying too much tax!
You can check your tax code online.
Using this link you can also inform HMRC of other details such as changes in your employer or pension provider, changes that affect your tax code and also check estimates of how much income you may get from jobs, pensions or savings interest. Alternatively you can ask one of our team who (when they are your agent) can call the agent priority line to do this for you.
For the tax year 2018-19 (in England & Wales) the Personal Allowance is £11,850 (more info here). The UK basic tax rate is 20% on earnings between £11,850 and £34,500. Please note Scotland has its own devolved tax rates.
When you start a new job, you may be on the wrong code and end up paying too much tax. It should correct itself in the following month, but it’s always worth checking your payslip. If you aren’t on the correct tax code, then it’s best to speak to us or HMRC as soon as possible. You can also apply online to HMRC via their “claim a tax refund page”.
Need Assistance with your PAYE Codings