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One unanswered question I still have from the webinar is when do the DWP notify HMRC of the start of pension/benefit? Is it just after the first payment or after the entitlement begins? For those who take their pensions 4 weekly or quarterly it would cause problems to wait until after the first payment is received.
Does anyone know when agents are supposed to be able to go in online and make changes to their clients' tax codes? Or has that been shelved?
In view of the fact that PAYE Tax Codes form an integral part of the PAYE system, and have done since the introduction of the system in the 1940's, some may question why anyone should consider the calculation of a PAYE Code, it distribution or operation as being a Mystery? Could it be that the considerable emphasis on "IT" has had an influence? Could it be that there are now many individuals within HMRC who do not have a PAYE Background?
When one considers the number of tax free allowances that were available in the 1960's compared to the few available today, many would say that PAYE coding has become considerably more simple? It is also worth noting that the number of "subsidiary or other incomes" has not changed much over the past 40 years so this is not a new phenomenon.
It was 1944/45. I have seen the IR publicity issued at the time. Did you know that only the top 25% of wage earners were expected to be included. The rest were expected to earn less than the personal Allowance.
The comment about TUPE being business as usual and should not cause problems is extremely well made for me, as is the complaint that IT causes problems too. Recently, I TUPE'd 130 staff and despite telling HMRC that this was happening, they still managed to "start" in the new company before "finishing" the old. Problems with the HMRC-approved payroll software (it took the provider 4 months to accept responsibility for the problems) only added to the confusion. Consequently, each member of staff was given a BR code and there was nothing the company could do to fix it, so it was left to the workforce to advise HMRC of it's error. Since the majority of the weekly paid direct labour force were not English speaking in any respect, it took several weeks, lots of phone calls, plenty of translations by a "trusted person" and lots of advances of pay to fix.
Goodness me, Kate, you know your stuff when it comes to Tax Codes. I feel somewhat deflated reading this. But on the positive side I now know where to come when I have any questions. Do you have a website?
Thanks for sharing.
Dave White
Thank you for this Kate. I have tended to 'delete' all HMRC emails about webinars - so missed this one which sounds like it was really informative.
Certainly my own move onto receipt of the state pension has revealed how HMRC allocates my personal allowance.
HMRC's tax coding systems were never perfect. And I suspect that there were many errors leading to under and overpayments of tax.
I remember the days when tax relief on mortgage interest was provided via tax codes...with the huge numbers of coding changes occurring several times a year.
And with the baby boomers increasingly moving into receipt of pension payments from two or more sources this is inevitably a potential source of coding errors for HMRC.
And of course many individuals have two or more sources of earned income nowadays.
I wonder whether overall HMRC is better today with issuing coding notices than it was say thirty / forty years ago?
The issue of "two or more sources of income" is often quoted as being an "issue" for PAYE Coding, when there is no logical reason for this to be a problem.
In reality each Individual has a Main Source of earned income which can be defined as the Employment where they spend most of their time. Each and every other source of earned income is therefore "subsidiary" regardless of the amount of income involved.
PAYE was designed to allocate the net Tax Free Allowance for an Individual to their "main source" of earned income, meaning that each and every source of "subsidiary" earned income would be taxed without any Tax Free allowances.
Where a source of income was a company ( non State ) Pension, the logic is ( or was ) that because this source of income would remain in payment until the Individual died, it should be considered as the "main" source of income.
None of this is complex or particularly complicated. Errors in an Individuals taxation of earned income is due almost entirely to the fact that HMRC have not properly calculated an Individuals Tax Free Allowance and allocated the correct PAYE Code Number to each or any Employment.
The notion that PAYE operation is anything to do with Employers or Pension payers is completely fallacious as the operation of a PAYE Code Number against earned income is simple arithmetic, where as the calculation of PAYE Coding is an HMRC responsibility?
Off course HMRC cannot comment on tax coding on investment income. Dividends are not guaranteed and with the minimum salary maximum dividend can fluctuate wildly and in owner of businesses can be manipulated. Recall when dividends were pushed up before the tax credit was removed for later draw down?
Any tax code that includes dividends I challenge and HMRC concedes every time. I notice they stopped doing including it in the tax code.
Each and every PAYE Code Number is an estimate, since as mentioned HMRC can not guarantee the allowances or deductions included in the calculation of a PAYE Code number to be absolutely accurate.
Therefore any Untaxed or Dividend income included is estimated. The idea that HMRC should not use estimates is not smart, but they should use the very best estimate that can be provided?