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HMRC publishes auto-coding guidance

4th Jan 2013
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HMRC has published guidance on auto-coding for tax agents preparing returns during Self Assessment season.

With auto-coding, the Revenue can automatically update a customer's PAYE tax code with information from their SA return. 

It was introduced for 2010-11 tax returns and is a quicker way of correcting tax codes to ensure clients pay the right amount of tax, according to HMRC.

Auto-coding uses information of other income and deductions from the return to calculate and issue a revised tax code for the current year.

Sending tax returns earlier will ensure that HMRC uses the right tax code, they stressed. 

SA auto-coding ensures information is passed to PAYE systems to calculate tax codes for the current and following year between mid-January and mid-March. When it's too late to issue a revised code - from mid-March to 5 April - only the tax code for the following year is issued.

Auto-coding won't transfer details of a state pension or company benefits, but information on what can be coded includes: 

  • some income from property, for example rental income
  • untaxed bank or building society interest
  • dividend income if you pay higher or additional tax rate
  • income from casual earnings 

However, your client can ask for tax due on other income now to be included in their tax code and pay tax due through SA instead, when they complete their return.

Some cases will see a client receiving multiple codes, although these are exceptional.

  • company benefits - if any are included in your client's tax code, then multiple coding notices may be issued, for example one when P11D is dealt with and one when the tax return is received 
  • underpayments - if an underpayment will be collected through a client's tax code, more than one code may be issues, for example one when the underpayment is coded and one when the return is received

For further information, see HMRC's SA auto-coding guidance: a guide for tax agents.


Replies (2)

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By Peter Tucker
06th Jan 2013 12:12

Child Benefit and PAYE Coding

Am I alone in thinking that HMRC should be utilising their expensive (cost over £118 million ) PAYE computer system to ensure that an appropriate PAYE Coding Deduction is calculated for anyone who would appear to be in receipt of Child Benefit and earning over the prescribed figure?

The estimate of the earned income for the new Tax year can easiy be calculated based on the known earned income supplied to HMRC each year.

The following web links make interesting reading?

Interested in other's thoughts.

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By David Heaton
07th Jan 2013 10:32

They don't know

The system won't work as you suggest, as there are no data (yet) on HMRC's system that link a CB recipient to a high earner.  To send out the warning letters, they did a cross-match on a rough basis between those earning at least £48k last year on the NPS/SA systems and those getting CB at the same address on the CB system, but relationships and addresses change, as do earnings.  The politicians who dreamt up the idea didn't think about the practicalities before they said what they were going to do.  It might get close to workable in a couple of years' time, once the first SA returns have been processed.. 

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