PAYE130025 - PAYE service income, allowances, benefits and deductions: IABD: allowances
The table shows the allowances and identifies whether
- The amount is carried forward to be coded in CY+1
And if
- You need to make a manual calculation before recording the information
PAYE11110 also gives more information about certain allowances.
| Item | Carried Forward | Manual calculation required |
| Blind Person’s Allowance | YES* | |
| Community Investment Tax Credit | NO | YES |
| Concessional Relief | NO | YES |
| Death, Sickness and Funeral Benefits | YES* | |
| Double Taxation Relief | YES* | |
| Enterprise Investment Scheme | NO | YES |
| Foreign Pension Allowance | YES* | YES |
| Gift Aid Payments | YES* | |
| Gift of Shares to Charity | NO | |
| Loan Interest Amount | YES* | |
| Loss Relief | NO | |
| Maintenance Payments | YES* | |
| Married Allowance | YES* | |
| Personal Allowances | YES* | |
| Personal Pension Payments | YES* | |
| Retirement Annuity Payments | YES* | |
| Venture Capital Trust | NO | YES |
*Note: At migration (June 2009), the CY and CY+1 amount will be recorded in IABD from COP. If you make any changes from the date of migration to the date of the next annual coding you must ensure you also amend CY+1 with the revised amount(s).
You should save and submit entries on the IABD screen for CY+1 completing the Contact History screen. Having completed this action you will receive the advisory message regarding annual coding. If you do not update CY+1, annual coding will pick up the wrong amount(s) and this will result in an incorrect code being issued. This is only an issue for the year migration to the PAYE Service took place.
Blind Person’s Allowance
- Displays any current amount already allowed
You should make any changes on the Details screen which displays
- Blind Person’s Allowance - This field can be edited so that you can enter the allowance for any new claims received. This field should not be used in surplus allowance transfer cases on the receiving partner’s record
- Transfer Surplus Allowance to Spouse / Civil Partner tick box. This should be completed on receipt of form 575
- Date from which first registered
Once the Landing screen has been submitted the coding calculation will
- Calculate the amount due from coding
- Record the Surplus Amount Transferred to Spouse / Civil Partner if the Transfer Surplus Allowance to Spouse / Civil Partner tick box is checked
You must then, manually
- Enter the Amount Received from Spouse / Civil Partner on the record of the receiving spouse / civil partner
Note: Blind Person’s Allowance will still appear in both partners’ tax codes, as the allowance transfer is only provisional until the end of the tax year when the full liability is known for both partners.
If both the Blind Person’s Allowance and the Amount Received from Spouse / Civil Partner is allowable, you will only see the amount of Blind Person’s Allowance on the Allowance screen. You must [select] the details page to view the Amount Received from Spouse / Civil Partner which will be used in the end of year reconciliation.
The amount received by the spouse / civil partner will be included as Blind Person’s Allowance for coding purposes.
Further information can be found at PAYE13105 and PAYE13110.
At migration of the COP record to the PAYE Service if the full amount of transferred Blind Person’s Allowance has been given in the spouse / civil partner’s code this will be recorded as Blind Person’s Allowance. In your day to day work
- Check E notes and 575 to confirm this
And
- Amend the entries to show Amount Received from Spouse / Civil Partner
Community Investment Tax Credit
- Enter the amount - this will be used for the End of Year Reconciliation
- Calculate the amount of relief due in terms of tax and convert this to a coding allowance - see Community Investment Tax Relief Manual (CITM) at CITM6005 and PAYE10030
- Enter the calculated coding allowance under Concessional Relief on the Allowances screen
Concessional Relief
You will need to manually calculate and record only the coding allowance due from
- Community Investment Tax Credit, for further details see CITM6005 onwards and PAYE10030
- Gift of Shares to Charity, for further details see the guidance in the Relief Instructions (RE) manual at RE1850 - RE1859 and PAYE10050
Or
- Venture Capital Trust, for further information see Venture Capital Schemes manual (VCM) at VCM64030 and PAYE10075
The actual amount invested or gifted should be recorded on IABD under the relevant allowance to be taken into consideration for the appropriate end of year reconciliation.
Note: If you amend Concessional Relief you must always check all sources to ensure the correct amount is coded.
You will also need to record any other relief as Concessional relief where no other coding item exists, see PAYE11110.
You should always make a Contact History note detailing the source amount.
Example: Relief due on gross superannuation payments
For 2008-2009 individual has made a £1000 gross lump sum payment to a superannuation scheme and relief has not been given through the net pay arrangement and you have established that tax relief is due using the Registered Pension Schemes Manual (see Registered Pension Schemes Manual (RPSM) at RPSM05201060). Generally in these cases tax relief is given through the Self Assessment system.
If an employee requests that tax relief be given in their tax code for the current year, you should
-
- Enter the gross amount paid £1000 as Concessional relief
- Make a Contact History note of the lump sum payment
When the system reconciles the year the relief has been given and an underpayment arises WI107 will be produced. You will need to
-
- Confirm the amount of the lump sum payment from the Contact History note
- Amend the Concessional relief to nil
- Enter the gross payment as RAR for the year of reconciliation only
Note: This will ensure the correct amount of tax relief is given in the final tax liability for the year in which the payment was made. See PAYE93090 for more information.
Death, Sickness and Funeral Benefits
- Displays any current amount already allowed
This is the total amount paid for allowable Friendly Society subscriptions, Trade Union subscriptions and Widows and orphans payments.
Use the Details screen to
- Enter the gross amount for each individual claim
- The system will then calculate the total amount due
- This is displayed on the Allowances screen
Notes:
| 1. | Relief on widows and orphans payments is restricted to a maximum of £100 at Basic rate. You should only include up to a maximum of £100 within IABD |
| 2. | You should not enter a figure in the New Amount on the Allowances screen as this could be a different amount to the total amount on the Details screen and would result in the c/f figure being incorrect |
If the gross amount is not recorded this will result in the incorrect Coding Allowance and End of Year Reconciliation.
Double Taxation Relief
- Enter the amount due
- See PAYE11110 for further information
Enterprise Investment Scheme
Note: From 6 April 2011 the rate at which EIS relief is due is 30 per cent. Tax coding will continue to give relief at 20 per cent, the further 10 per cent will be given through the customers Self Assessment return. For more information see PAYE10045.
- To calculate the amount of relief due see PAYE10045
- Enter the calculated amount
Foreign Pension Allowance
Foreign pension allowance will be calculated on the relevant foreign pension when the individuals SA tax return is captured. The individual will no longer receive this allowance through their tax code.
In complaint cases or where the individual insists, foreign pension allowance can continue to be included in the tax code. The allowance due is 10 per cent of the qualifying pension. Further information is given in the Employment Income Manual at EIM74006. In these cases you should
- Calculate the allowance due
- Enter the calculated amount
- Enter the amount of the pension received on the Foreign Income screen under Foreign Pension and Other Income at PAYE130055
Gift Aid Payments
- Displays any current amount already allowed
This is the total amount of Gift Aid Payments from the information recorded on the details screen. This is calculated by the system as follows
- Gift Aid Payments plus
- One-off Gift Aid payments minus
- Gift Aid treated as paid in previous tax year plus
- Gift Aid treated as paid in current tax year
Note: You should not enter a figure in the New Amount field on the Allowances screen as this could be a different amount to the total amount on the Details screen and would result in the c/f figure being incorrect.
Use the Details screen to enter the net amounts
- Gift Aid payments - include payments from regular monthly / annual payments. This is carried forward to the following year
- One-off Gift Aid payments - include a one off payment paid in the IABD year. This will not be carried forward
- Gift Aid treated as paid in previous tax year - include any payments made in this IABD year (that are included in (a) or (b) above) that are to be treated as paid in a previous year. This will not be carried forward
- Gift Aid treated as paid in current tax year - include any payments made in a later IABD year that are to be treated as paid in this IABD year. This will not be carried forward
For more information see PAYE10025
If the net amount is not recorded this will result in the incorrect Coding Allowance and End of Year Reconciliation.
For PAYE / SA cases only, gift aid payments should only be entered in IABD on the details screen from the SA return for CY and CY+1 to ensure the correct coding allowance is given. For CY-1 the cases will be cleared by SA.
Gift of Shares to Charity
- Enter the amount which will be used for the End of Year Reconciliation
- If relief is claimed through the tax code
-
- Calculate the relief due in terms of tax and convert this to an amount to be include in the code, for further details see guidance in the Relief Instructions (RE) manual at RE1850 - RE1859 and PAYE10050
- Enter the calculated coding allowance under Concessional Relief on the Allowances screen
Loan Interest Amount
- Enter the full amount due
- For more information how to calculate the amount see PAYE11110
Loss Relief
- Enter the full amount due
- For more information how to calculate the amount see PAYE11110
Maintenance Payments
- Enter the amount due
- For further information how to calculate this see PAYE10056 and RE1095
The details screen will display
- The eldest child’s date of birth
- Enter the appropriate date of birth
Married Allowance
For any new claims for married allowance or details of separation, you should first complete the Marriage and Civil Partnership details screen in ‘Individual’. For more information, follow the guidance in SPD 4a.
IABD will automatically carry forward the allowance from CY where no End Date has been recorded against the marriage in ‘Individual’.
Where an End Date has been recorded against the marriage in ‘Individual’, annual coding will remove MCA from the CY+1 tax code. You do not need to do this manually.
The Allowance screen displays
- Married Allowance (MAA) for an individual aged 73 but no more than 74 (born before 6 April 1935 but not before 6 April 1934)
- Married Allowances (MAE) for an individual aged 75 and over (born before 6 April 1934 and the date of marriage is before 5 December 2005)
- Amount carried forward from coding
Or
- The amount from the COP record at migration
You should always make any changes on the Details screen
The details screen will display
For marriages before 5 December 2005
- The Married Couple’s Allowance Entitlement due to the husband
- The amount displayed is from the latest coding calculation
Or
- The amount from the COP record at migration to the PAYE Service
When a claim to Married Allowance is received you must
- Ensure that you enter the full amount of Married Couple’s Allowance entitlement for that year (before any income based reductions, as these will be made by the system when the information has been submitted from the Landing Page)
Note: This should only be completed on the husband’s record.
Once the Landing screen has been submitted the coding calculation will
- Make any adjustments for age allowance
- Record the new amount of Married Couple’s Allowance Entitlement allowed in the code
Surplus Allowance Transfer - Form 575
You should update the husband’s record only and
- Complete the tick box Transfer Surplus Allowance to wife
Once the Landing screen has been submitted the coding calculation will
- Calculate the amount due from coding
- Record the Surplus Allowance Transferred to Wife on the husband’s record
You must manually record
- The Surplus Allowance Received from Husband on the wife’s record
Note: In the scenario that the husband has a primary and secondary record, the system will first set all the surplus allowances against the husband’s secondary record. If the secondary record will not use all the surplus allowances then in the Edit Employment Allocation screen enter the amount of allowances required against the secondary record to cover the secondary estimated pay, recalculate the code and the system will calculate the surplus married allowance transferred and record this on the married allowance screen in income, allowances, benefits and deduction.
Elected Allowance Transfer - Form 18
You should select the appropriate drop down menu Married Couple’s Allowance to Wife
- None
- Full
- Half
- Other
Note: ‘Other’ represents the amount of Married Couple’s allowance transferred for marriages prior to 5 December 2005 in the year of marriage.
Once the Landing screen has been submitted the coding calculation will
- Calculate the amount due from coding on the husband’s record
You must manually
- Enter the amount of Married Couple’s Allowance from Husband on the wife’s record
Note: ‘Other Amount to Wife’ will no longer be used for marriages prior to 5 December 2005
For marriages / civil partnerships on or after 5 December 2005
For all claims on a form 575 or Form 18 you will need to manually calculate the amount due see PAYE13110.
- Enter the amount of the Married Couple’s Allowance
- Ensure that you enter the calculated amount of Married allowance required for the highest earner and the surplus is recorded on the spouse / civil partners record for the relevant year
More information on marriage and civil partnerships can be found at PAYE103060 and in SPD 4a.
Note: You will also need to enter an amount of Estimated Income on the Employment Estimated Earnings screen in IABD, see PAYE130045, for the system to calculate the reduced age-related allowance.
Further information on ‘Employment Estimated Earnings’ can be found at PAYE13090 and on ‘Estimated Income’ at PAYE13085.
If Married Couples Allowances has been allowed in CY and this is also the year of separation or the spouse or civil partner is deceased, you cannot amend CY+1 to withdraw the allowance. The process at Annual Coding will check the marriage status and will remove the Married Couple’s Allowance where no marriage exists for CY+1.
Records set up from forms P14
For some occupational pensions, the first year in which a P14 has been received is 2008-09 but the start date may be earlier than CY-1. These cases would not have had a COP record set up previously and therefore the forms P14 have correctly set up the records on the PAYE Service.
If the individual or agent makes a valid claim for married allowance, you should update the ‘Individual’ screen following the guidance in SPD 4a.
IABD should then be updated with the married allowance figure starting from the earliest tax year a P14 has been received. This will ensure that the EOY reconciliations will correctly include the married allowance in the calculation.
Personal Allowances
The Allowance screen displays
- Personal Allowance (PA) for an individual aged under 65 (born after 6 April 1944)
- Personal Allowances (PAA) for an individual aged 65 but no more than 74 (born before 6 April 1944 but not before 6 April 1934)
- Personal Allowances (PAE) for an individual aged 75 and over (born before 6 April 1934)
- This is read only. Any adjustments required to these allowances will be displayed on the Tax Code details screen or within the relevant end of year reconciliation.
Personal Pension Payments
Personal Pension Relief (PPR) can only be claimed by individuals who are under the age of 75. In your day to day work if you find individuals aged 75 and over with PPR in their tax code you should remove the allowance and write to the individual to explain that they are no longer eligible to claim the relief.
For more information regarding PPR, refer to the Relief Instructions Manual at RE275 onwards and PAYE80035.
Where an individual is eligible to claim PPR relief you should
- Enter the gross amount of the payments
- To calculate the amount see PAYE10065
If the gross amount is not recorded this will result in the incorrect coding allowance and end of year reconciliation.
- The Type of Pension Plan will be displayed on the Details screen with the selection made from the Allowance screen
- You should select ‘YES’ from the Eligible for Pension Plan Relief field
- You do not need to make any entry in Allowance Cessation Date for Personal Pension Payments
- Tax relief in coding will be calculated using the highest rate of tax applicable at the coded employment
Note: If an employee requests that tax relief be given in their tax code for the current year for a one off lump sum gross payment you should follow the instructions on Concessional Relief, see sub heading above.
Retirement Annuity Payments
- Enter the gross amount of the payment
- To calculate the amount due see ‘Allowances and Reliefs’ at PAYE11110
- You should select ‘YES’ from the Eligible for Pension Plan Relief field
- You should enter the Allowance cessation date - this must be in the format DD/MM/CCYY
Venture Capital Trust
- Enter the amount claimed which will be used for the End of Year Reconciliation, for further information on what to allow see the Venture Capital Schemes Manual (VCM64020)
- Calculate the relief due in terms of tax and convert this to an amount to be included in the code see VCM64030 and PAYE10075
- Enter the calculated coding allowance under Concessional Relief on the Allowances screen
