If you complete a self assessment tax return and are employed under PAYE it is important to understand the link between your self assessment tax return and your PAYE tax code.
Self Assessment Auto-Coding
HM Revenue & Customs (HMRC) automatically update a customer’s PAYE tax code with information from their Self Assessment tax return. This is known as auto-coding.
Auto-coding was introduced for Self Assessment tax returns for 2010-11 for customers who had a PAYE source of income. Auto-coding uses the information from a self assessment tax return to calculate and issue a revised tax code automatically for the current tax year.
Auto-Coding and Tax Refund Claims
If you have made an expenses claim through self assessment it is normal for your current tax code to be adjusted with the same expenses figures shown in your tax return. It is important to know that if your expenses are not going to be the same as the previous tax year to let HMRC or your agent know as soon as possible, as you can either overpay or underpay tax.
When will a tax code be updated?
Providing a tax return is sent on time, all relevant information will be passed to PAYE systems and tax codes will be calculated for the current and following tax year between mid-January and mid-March. From mid-March onwards it is too late to issue a revised code for the current tax year and so only the tax code for the following year is issued. For this reason it is important to get self assessment tax returns in early.
What can change your tax code?
Different types of income, allowances and reliefs can be included in a tax code; this can include property income, some savings income, commission and other earnings.
The auto-coding process will not transfer details of state pension and company benefits. This information will already be held on PAYE records and will be updated through other automated processes.
Why have I received more than one tax code?
Occasionally, self assessment auto-coding can’t calculate your tax code. In these cases the code is reviewed manually. This may mean that, sometimes, more than one tax code is issued. This can happen if you receive company benefits or when an underpayment of taxes is to be collected through your coding.
Can I pay tax on other income directly?
It is possible for you to ask HMRC that tax due on other income is not included in your tax code but is paid through self assessment instead. You will be given this option when completing your self assessment tax return.
