PAYE13060 - coding: coding: general principles: ESTPAY


ESTPAY is usually based on the pay at the coded source and is used by the COP system in the calculation of underpayment restrictions and allowance restrictions. When you are considering ESTPAY accept any estimates provided by the taxpayer.

If you have a recent return or other evidence such as the presence of the SUB signal to suggest that the taxpayer has other income, you may need to take this into account when arriving at the ESTPAY figure. Do not issue a return or enquiry to check if there is other income unless you think this will have a material affect on the computation.

Remember that ESTPAY is not carried forward and must be entered in COP Function CD for the year to which it relates. Consider if you need to enter a figure for both CY and CY+1.

You will need to enter a figure for ESTPAY on the record if you come across cases where the computer has been unable to calculate ESTPAY.

You will need to review the figure for ESTPAY on the record if

  • It becomes apparent that the current ESTPAY figure needs amending because, for example, the taxpayer's rate of pay has altered as a result of a change of job or retirement (however, in the majority of cases you will not know the revised rate of pay)
  • The case is reviewed and married allowances or maintenance payments are present. When ESTPAY is amended, the married allowance or maintenance payments need to be entered again so that any HPAR can be calculated
  • A code is amended in year and a potential underpayment (PUP) is calculated
  • A calculation is issued to the taxpayer that results in an underpayment that will later be collected through the code
  • The case is reviewed and there is more than one coded source

Computer calculated ESTPAY

The computer attempts to post a figure of ESTPAY on the record for CY+1 at the Annual Coding Initial Review in November. It will not overwrite any figure already entered manually.

The computer will use the CY-1 pay figure, or where this is not present on the record, CY-2 pay figure.

The computer cannot enter a new figure if any of the following apply

  • CY-1 pay is nil
  • There is no pay present for CY-1 and CY-2
  • The current employment began after the start of CY-1

Where the computer cannot enter a new figure

  • If ESTPAY is not present on the record for CY, processing will assume basic rate liability when calculating HPAR
  • If ESTPAY is present on the record for CY, then this amount will be carried forward

It is therefore important to review ESTPAY during day to day work, particularly if the code contains an allowance restriction or an underpayment.

More than one coded source

Where there is more than one coded source of income you may need to check that the ESTPAY being used is calculating the correct amount of restriction. Where the taxpayer is liable at the same rate at each source it may not be necessary to change the ESTPAY. However, where one or more of the following situations exist, a check should be made

  • The taxpayer is NNL at the main source
  • The main source contains AAE
  • The rate of tax payable at the sub-source is higher than the rate payable at the main source
  • There are tax adjustments such as ELR, BRR or HRA

Firstly make sure you need to maintain any sub-source record. If you need to maintain the sub-source(s)

  • Work out the estimated liability for the year
  • Calculate the HPAR needed to collect the correct amount of PAYE tax
  • Enter an appropriate figure of ESTPAY to give you the HPAR you want

The following formula can be used to calculate ESTPAY where HPAR is present and there are tax adjustments in the coding

  • (Main Source pay minus ELR / BRR / HRA) + (Sub-source Pay minus AAE)

Although the computer will automatically calculate the HPAR and overwrite any figure you have entered in COP Function CD, you need to establish first the amount of the HPAR so that you can calculate any AAE / ELR or BRR. For HRA, you do not need to work out the HPAR first.

UPC present

When UPC is present

  • If the UPC is not being changed the system will not recalculate the UPR, this will need to be done manually
  • If there is a new or different UPC amount you will need to enter the new amount so that the system will calculate the UPR

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