Check Your Tax Code
Your tax code determines how much tax is deducted under PAYE.
You should always check your tax code is correct as errors may result in too much or too little tax being deducted.
HMRC may also adjust the code to collect tax on savings income. You do not need to have this collected through your code.
Instead you can ask HMRC to take the savings adjustment out of your code and pay the tax under the self-assessment system. This will increase your take home pay each month.
Where an individual’s income is over £100,000 the personal allowance is reduced by £1 for every £2 of income above £100,000.
Where HMRC expect the allowance to be abated on the basis that the previous year’s income was in excess of £100,000, they will take away the personal allowance from the tax code.
If your income is likely to be less than £100,000 you can ask that they readjust the code, rather than waiting until you do your Tax Return to claim a repayment.
This will provide a cash flow advantage.
John has a company car.
In April 2012 he changed his car to a more environmentally friendly model.
As replacement cars do not now need to be notified to HMRC on form P46 (Car) (although employers can provide HMRC with this information online if they want to), HMRC may not be aware of the change until his P11D for 2012/13 is submitted in July 2013.
John’s tax code for 2012/13 is based on his previous car and consequently John pays more tax than he needs to each month as a result.
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