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Advantages and disadvantages of the K code number for collecting income tax under PAYE.
KEY POINTS
- K codes are negative codes so adjustments are added to pay rather than deducted from it.
- The K code can avoid a tax underpayment accumulating during the year.
- A regulatory limit prevents tax deductions exceeding 50% of gross pay.
- Weekly or monthly PAYE tax liabilities above the regulatory limit are carried forward.
- K codes will not be adjusted automatically when personal allowances increase.
K tax codes were introduced by HMRC in 1993 and are “prefix” codes. This means that the descriptive letter is placed in front of the tax code number for example K300 rather than after it in the way of the more familiar “suffix” codes using the letters L M N Y. Perhaps the most common...
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