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HMRC are considering further changes to the coding out of debts and underpayments, as part of the department’s efforts to improve the collection of debt.
The Revenue can currently code out debts, PAYE underpayments and self assessment balancing payments of up to £3,000. The limit applies to all taxpayers within PAYE, regardless of their income. The taxman would like to make better use of coding out by allowing larger debts to be collected through PAYE from those with higher earnings. The proposed graduated scale is as follows.
HMRC are considering further changes to the coding out of debts and underpayments, as part of the department’s efforts to improve the collection of debt.
The Revenue can currently code out debts, PAYE underpayments and self assessment balancing payments of up to £3,000. The limit applies to all taxpayers within PAYE, regardless of their income. The taxman would like to make better use of coding out by allowing larger debts to be collected through PAYE from those with higher earnings. The proposed graduated scale is as follows.
| Annual PAYE earnings | Coding out limit |
| Less than £30,000 | £3,000 |
| £30,000 to £40,000 | £5,000 |
| £40,000 to £50,000 | £7,000 |
| £50,000 to £60,000 | £9,000 |
| £60,000 to £70,000 | £11,000 |
| £70,000 to £80,000 | £13,000 |
| £80,000 to £90,000 | £15,000 |
| More than £90,000 | £17,000 |
The new limits would come into effect in 2015 and apply to debts as well as self-assessment tax underpayments. It would continue be up to taxpayers to let HMRC know if they did not want a tax underpayment coded out, but they would have to propose another way of paying the outstanding tax that is acceptable to the department.
A 50% cap already applies to K codes to prevent deductions of more than half being taken from a taxpayer’s earnings. The Revenue proposes to extend this limit to all tax codes so that employers and pension providers do not make tax deductions in excess of 50% of an individual’s relevant pay.
Responses on the detail and implementation of the proposed changes should be sent by email no later than 5 September.
