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HMRC Tax Codes 2015-2016

New tax year, new tax code

HMRC have been issuing new tax codes over the last few months for the 2015-2016 tax year. You may well have received a Coding Notice explaining your new tax code, particularly if you have more than one job, or income from more than one pension, or even a combination of both.

HMRC also informs your employer or pension provider of your new tax code, so from 6 April 2015 they should be able to deduct the correct amount of tax from your income.

Cracking the PAYE Code

You need to have a different tax code for each of your sources of income to ensure that you get the full benefit of your personal allowance (for those under 65 this is £10,600 for the 2015-2016 tax year). For example, if your earnings from one job exceed your personal allowance, then HMRC will offset your personal allowance fully against that income and deduct tax at basic rate (or higher rate) from your second source of income.

Difficulties can arise if both your sources of income fall below the personal allowance. If this is the case, HMRC have to apportion the personal allowance between them, for example, they may allow £6,600 against your first job and £4,000 against your second job. If at the end of the tax year, the income from your first job was less than £6,600 or the income from your second job was less than £4,000 then you will not have received the full benefit of your personal allowance and should be due a tax refund.

Additional Reliefs

As well as your personal allowance, other reliefs that you are entitled to may be included in your tax code, for example, blind persons allowancemarried couples allowance (for those born before 5 April 1935) and also the new Marriage Allowance, allowing you to transfer 10% of your unused personal allowance to your spouse, or vice versa . You may also be entitled to relief for expenses you pay that HMRC deem to be tax deductible, the most common of which is professional subscriptions or higher rate tax relief on gift aid payments.

You may also see negative entries on your Coding Notice which reduce the reliefs available against your income. These may include amounts of unpaid tax in previous years, an estimate of other income receivable in the year (for example rental income) or taxable company benefits that you receive.

Check Your P60!

Although your Coding Notice is designed to try and ensure that you pay the right amount of tax throughout the year, it is still important to look at the figures entered on your P60’s at the end of the tax year and check that you are happy that the correct amount of tax has been deducted. If you have any concerns with this, please contact us and we will be happy to help.

If you are unsure about any entries on your Coding Notice, you can contact HMRC using the contact details on the Coding Notice. For more information, please don’t hesitate to contact us on 01872 271655.