Paying a self-assessment liability via PAYE code

The majority of people in the UK tax under PAYE and do not have to complete a Self Assessment tax return. But, where you have income that is not taxed at source or may be liable to higher rate tax on income. That has only had basic rate tax stopped you will need to complete a self-assessment return. It is your responsibility to notify the charge ability to tax to HMRC.

 

 

Despite all of the tax administration changes which have come in (and are planned) – such as personal tax accounts and tax return pre-population measures – the old option of paying a self-assessment liability via the PAYE code still exists.

 

 

However, there have been a number of changes to the policy over recent years. This article sums up the key points and will help ensure you and your clients are fully aware of how it now works.

 

Recap

 

Essentials – the option can only be used if:

 

 

  • The tax owed is less than £3,000
  • The taxpayer already pays tax through PAYE, for example as an employee or in receipt of a company pension. (Note that the online tax return must have been submitted by 30 December and be very careful if the client’s tax return has not yet been submitted as the payment option is now not available.)

 

 

The amount of income received/PAYE paid is relevant to whether the option can be used. The PAYE code option can’t be used if:

 

 

  • There is not enough PAYE income for HMRC to collect the tax owing
  • Using the option would mean that the taxpayer would pay more than 50% of their PAYE income in tax
  • The taxpayer would end up paying more than twice as much tax as they normally do
  • Class 2 NIC contributions can only be paid through the PAYE code if they were necessary starting before April 2015.

 


 

Useful links:

 

 

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