PAYE13001 - coding: coding: general principles: introduction

A tax code reflects an individual's allowances and deductions, liability to lower or higher rates of tax and can also take into account any other sources of income he or she may have. The tax code is calculated on a provisional basis using the information known to us at the time the code is issued.

The tax code can change throughout the year depending on announcements made by the Chancellor in his Budgets or because of personal circumstances.

Most employees first get a code when they start work. The employer decides this code by following fixed rules. If the employee's pay is above the limit for tax deduction, the employer should tell you. You must then decide if the first code used by the employer is correct. If the code is wrong you will need to issue an amended code. You will also have to review codes at other times

• In day to day work, when you know an employee's circumstances have changed
• At Annual / Budget Coding, to make any changes needed for the next year, including those arising from the Budget proposals
• At the automatic National Insurance benefit review

Each time you update an item in the coding, or review a code because of updated information about income you must always

• Consider information already on the record that is not directly related to the correspondence such as ECS Enotes
• Consider the knock on effect to other items, such as reducing / increasing age related allowances (ESTINC), ESTPAY, HPAR, BRR / ELR, HRA and so on
• Review the code(s) in operation at any sub-source(s)
• Review the CY+1 code

Using Coding Assistant (CA)

The SEES Coding Assistant and coding Assistant Lite (in the case of AA review), is mandatory and must be used in all cases.

You must also use the ‘Copy for ENOTE’ facility within the CA. This will help future staff dealing with correspondence, reduce the number of Contact Centre referrals and help QA / QC reviewers understand how the code was calculated.