Privacy Vs HMRC collecting other tax through PAYE

Can I elect to have tax due on investments not collected through my tax code?

Didn't find your answer?

Good afternoon, 

I'm wondering if someone can shut down my query or if I have an argument, point me in the right direction.  Sorry it's a bit long, but the actual question if you want to skip, is in bold at the bottom.

I work for an accounting practice. I have a fairly large amount of savings since inheritance on which I now pay tax on (some of it is in ISAs but still earn over the allowance on that which isn't).

The problem is HMRC keep wanting to change my PAYE code to collect the tax that way, despite me calculating the tax due as soon as possible after tax year, contacting them and offering to pay it. 

I don't want HMRC collecting through my tax code, because this obviously means my employer, being an accountant and familiar with these things, can easily assume that I have other earnings outside of my employment. This throws up multiple issues, such as my employer possibly thinking:

1) I'm doing work on the side, perhaps as far as they know I'm doing it during working hours or for the firm's clients, which is obviously not allowed (but there is history of other employees suspected of doing this).

2) that I do any other trade with a source of income and therefore not in need of a pay rise.

3) that I have a level of savings that I don't need a pay rise, even if I deserved one.

I don't feel as though I should have to explain my personal private circumstances to my employer in regards as to my actual circumstances and why I have tax to pay in addition to that of my employment.

Since being at the firm for many years, I was getting regular, deserved pay rises.  But it happens to be that in the last couple of years, since HMRC have been issuing coding notices, I haven't been, despite the firm doing well and usual metrics of improvement for myself showing it would be deserved. Therefore I'm wondering if the points above are affecting this as a result of the coding notices.

Regardless of the reasons for lack of pay rises, I asked HMRC if they would stop and I could perhaps go onto self assesment and they refused. I paid the balance of what was due (as a result of the figures on coding notices being estimates) from 2022/23 shortly after the year end, after notifying them of my investment earnings. They then agreed to put my tax code for 23/24 back to 1257. I've now been contacted by our payroll department that they've changed my tax code again for 23/24 to collect more tax from me.  No doubt at this rate my tax code for 2024/25 won't be the standard 1257 either.

Im really not happy that because of HMRCs system, my employer has to be "involved" in matters not related to work and suspect this is having a negative effect on my employment situation and potential earnings.

My question is, is there a way or an argument in regards to privacy, data protection or other reasons to make HMRC stop trying to collect the additional tax via my tax code?  I did explain to HMRC the last time I called that I could do my own self assesment in half the time I was on hold to them to notify them of my earnings, but they're not interested in me completing a self assesment.

Any advice would be much appreciated.

Replies (20)

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By DKB-Sheffield
04th Feb 2024 16:00

Your question seems to refer to two very distinct issues...

1. The coding out of tax. I think any argument on privacy and data protection grounds would be slim. HMRC collect the tax you owe... be that through your tax code, or directly. If you're not 'in Self Assessment', what other option do they have? I note you have spoken to HMRC and they have refused to put you 'in Self Assessment' but, have you actually registered (SA1) and had that rejected?

2. I would hope the lack of pay rise is based on other matters... not your tax code. If you are being penalised on account of you tax code, I would certainly suggest you have grounds for a grievance. A tax code is not proof of what, or where, your extra tax comes from. Indeed, I suspect a great many tax codes will be non-standard with the rising interest rates. However, only your employer can advise why you haven't received a pay rise, and that is really for those 2 parties to deal with.

I suspect point 2 is the main issue here. HMRC should not amend a coding notice, to settle an employment dispute, and risk unpaid tax (I am NOT saying you won't pay... but there'll be a few hundred other people in the queue that won't).

Talking to your employer to express that you feel you are being undervalued is the best first step IMO. If they say it's because you have other income on your tax code... or in the absence of saying that - are unable provide justified reasons... you may wish to contact ACAS.

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Replying to DKB-Sheffield:
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By paul.benny
04th Feb 2024 17:38

+1 to the recommendation to query the lack of pay rise.

Is there a performance review process?

If I thought you were working for yourself in my time, there would presumably be rather stronger evidence than through your tax code. And I'd raise it directly rather than in such an oblique fashion.

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Replying to paul.benny:
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By Paul S MAAT
04th Feb 2024 18:32

Hi Paul,

Thanks for your response.

On paper there is a process. But it isn't exactly followed. Whatever else the boss thinks of me, I'm sure they trust me enough and know that I'm not the type to take liberties like that. If he thought I was, I'd rather him raise it with me as well so we can set that straight. I very much doubt he suspects I'm doing private work during my working hours (it's so busy I wouldn't know where to find the time anyway).

I was thinking more along the lines that he would be able to have a guess at my income from outside employment based on the new code and think to himself, even if he didn't think I was doing anything in breach of my contract, he could justify in his head that that income would subsidise any lack of pay rise they're not awarding me.

My question was more wanting to know if there was a way to stop HMRC collecting through my tax code (as there is for those on SA) to save messing about on the phone and to negate any problem, if there is one, in regards to how my employer views it, plus if I could use that potential problem as a reason to get HMRC to stop collecting through my tax code.

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Replying to DKB-Sheffield:
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By Paul S MAAT
04th Feb 2024 18:10

Evening DKB.

Thank you for your response.

Actually part 1 is more of the issue for the purposes of my question, for the expertise available on here. The pay rise I only mention to add context and one reason why I don't like the current arrangement with HMRC. But being a very small firm where the owner will know about my coding changes, I am suspicious that perhaps he thinks because per HMRC I have other income, he could see that as an excuse to let that subsidise what I should be earning as an employee. I don't really want this thread to turn into a guide on getting a pay rise.

What is collected though my coding notice throughout the year is only based on estimates obviously, so the past couple of years I'll call them shortly after the year end to confirm the actual figures and make payment then. So that's one way they don't mind collecting it. But why not let me do that for the total amount and not collect some through my tax code? I suspect, as you mention, because (based on experiences with clients) not everyone is as honest, good at keeping records to be able to accurately give them the figures or at having the cash available to pay the full amount as a lump sum, so they don't want to allow it.

I have just submitted an SA1 though as suggested, thanks for that. I'm sure it won't hurt. The worse that will happen is they say no. If they allow it, then it will save me a lot of time on the phone (mostly on hold) and will go towards clearing up other matters.

Thanks again.

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stonks
By WinterDragon
04th Feb 2024 16:03

I can't help with the employment law bit and the legal privacy bit but what is stopping you from registering for Self Assessment. Have you tried filling in an SA1 rather than just speaking to HMRC on the phone. If you earn over £50k and have children then hell I'd suggest claiming child benefit just so you fall within SA and you can make sure any excess tax is not coded through PAYE.

I really doubt that your employer would take employee tax codes into consideration for payrises. Again it depends on the size of your firm as to whether gossip is making it's way from payroll to your line manager and whether your tax code is really that big of a conversation topic.

Edit: I'm clearly not fast enough on the keyboard, DKB's response covers my points much better in his response above

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Replying to WinterDragon:
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By Paul S MAAT
04th Feb 2024 18:15

Evening,

Thanks for your reply and advice.

I don't earn over £50k or receive child benefit. I have just submitted a SA1 though based on yours and others suggestions. That will save a lot of time messing about on the phone if successful, which is a bonus if nothing else good comes of it.

I work in a very small firm and I think these days they would try and justify to themselves not giving a pay rise by any means, although I'm sure they wouldn't admit if this were the reason or a factor.

Thanks again for your response.

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By David Ex
04th Feb 2024 16:42

As an aside, would using a Coding Notice for a purpose other than intended be a breach of data protection legislation?

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Replying to David Ex:
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By paul.benny
04th Feb 2024 17:31

I very much doubt it - those issued to employers merely state the tax code to be used and any inferences drawn are speculative. I would expect that only those involved in processing and approving payroll would have reason to see the notices and that employer would have appropriate data protection beyond that.

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By Tax Dragon
04th Feb 2024 19:47

Certain things can be coded out without the taxpayer having a say, eg under Reg 14(1)(b). An example on a recent thread was state pension, because that is PAYE income.

Other stuff can be coded out, but the taxpayer can object. Read the link in David's initial response for more information.

There are many reasons why a tax code might differ from the 'basic' 1257. It's none of an employer's business. You have legal rights [outside the scope of this forum, but you can take advice] and of course the option to find an employment where you do not feel undervalued.

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By taxdigital
05th Feb 2024 11:19

I don't think privacy laws have got anything to do with it particularly given that almighty HMRC do have statutory powers to look at various items in determining the code. As others have said you could pick up a fight with HMRC per Reg 14(1)(f) and then take the matter to the Tribunal, if it matters so much.

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Replying to taxdigital:
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By richard thomas
05th Feb 2024 17:04

taxdigital is quite right. HMRC are (oh so surprisingly) in breach of the law. If you have asked them not to do it, you have objected under reg 18 of the PAYE Regs. If they fail to do what you ask send them an appeal.

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Replying to richard thomas:
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By Paul S MAAT
06th Feb 2024 16:14

Thank you both.

I think I'll put it in writing to HMRC, explaining anything like that to the people they employ to pick up the phones would fall on deaf ears again I think.

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Replying to richard thomas:
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By Paul S MAAT
06th Feb 2024 16:14

Thank you both.

I think I'll put it in writing to HMRC, explaining anything like that to the people they employ to pick up the phones would fall on deaf ears again I think.

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Replying to Paul S MAAT:
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By richard thomas
06th Feb 2024 16:33

An appeal under reg 18 must be in writing.

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By Markcairns67
07th Feb 2024 09:42

Many years ago, I worked in the payroll dept in a small Manchester co., prepping the monthly payroll journal.

People in the team did gossip about tax-codes, the size of salary sacrifice pension contributions, etc. and the implications of the same. For example if one was contributing 30% to sal sac pension, they might say he's minted!

Sorry this doesn't directly answer your question but if it's a tiny owner run firm, your concerns are reasonable imho.

Like others have suggested, registering for SA online is probably the first thing to try.

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By towat
07th Feb 2024 09:58

Fill in an SA1 online and HMRC will issue a UTR and self assessment, at least for the first year, although once you have the UTR you should be able to complete an online SA every year, do it early and pay the tax, this should stop them trying to collect through Tax code, or at least give you an argument to change your code if they do.

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Replying to towat:
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By Paul S MAAT
11th Feb 2024 13:24

Hi Towat,

Thanks.

I've just completed it again (I missed ticking a box in my first attempt last week). I've ticked the "I've untaxed income which cannot be coded in PAYE" box this time. Fingers crossed they agree.

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By listerramjet
07th Feb 2024 10:06

Perhaps change jobs?

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Replying to listerramjet:
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By Paul S MAAT
11th Feb 2024 13:26

All in good time.

That wouldn't solve my grievance with HMRC though.

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