PAYE14025 - coding: coding functions: function CD: code reductions
This subject is presented as follows
Code basis determined by the computer
Computer holds insufficient information to revise code
basis
Code basis altered
Jobseekers Allowance cases
Code BR on WK1/MTH1 basis
Computer printed explanations on form P2
Situations where there will be no computer printed
explanation on form P2
Code basis determined by the computer
The following tells you what action the computer takes when a code is reduced.
| Circumstances | Computer Action |
| Cumulative code is
reduced or not operated code is reduced
And The potential underpayment to date of change is less than £15 | Cumulative coding operates. |
| Today's date is 6 January
or later in the tax year
And Potential underpayment to date of change £15 or more But Extra tax due to end of year is less than £100 from date of change | NOT OPERATED code basis
given. Potential underpayment for the full year is calculated but
not advised to the taxpayer automatically on the form P2.
To generate a note on the P2, enter the special note NOT OP and the amount in CD format 2. Further information on how to do this can be found at PAYE11035. |
| ll other times | WK1/MTH1 basis operated. Potential underpayment to the date of change is calculated and advised to taxpayer on the form P2. |
| WK1/MTH1 code is reduced | The WK1/MTH1 basis continues to be applied. |
| Reduction to code BR and WK1/MTH1 basis | Code 0T will be allocated automatically. |
| Where code 0T is entered in the code field of a subsource record | The WK1/MTH1 basis is given. |
Computer holds insufficient information to
revise code basis
When the computer does not hold sufficient information to revise the code basis (such as the last cumulative or operated code), the existing basis will be continued. In such circumstances the code basis and any potential underpayment arising should be checked carefully and amended where appropriate.
Code basis altered
If you alter the computer's decision on the code basis to be operated
- The computer will not recalculate any potential underpayment. You must do this manually (see PAYE14065)
- An inappropriate computer printed explanation may be put out on the form P2. You may need to send a further explanation
Jobseekers Allowance cases
In Jobseekers Allowance cases the cumulative basis will always be allocated. Further information is available at PAYE14065.
Code BR on WK1/MTH1 basis
If code BR is to be applied on a WK1/MTH1 basis on a main source record take the following action
- Reduce allowances to nil and press Enter. The computer will automatically set code 0T
- Enter code BR
- Enter ‘Y’ in WK1/MTH1 field
Then
- Press Enter. The computer will automatically enter M in P2? field and set the MCODE (CODE-BR) signal
Computer printed explanations on form P2
A standard explanation, appropriate to the code change, will be printed on the P2 in the following situations
| Situation | Text |
| New suffix code less than
last operated code
And Wk 1/Mth 1 basis allocated And There is a PUP. For example, code 500H becomes 385T WK 1, PUP £135 And SA signal on record | We have changed your tax code and your tax free amount for the year has gone down. This means that between 6 April [TAX YEAR START DATE] and the date [EMPLOYER NAME] used the old code for the last time you will have had the benefit of too much tax free amount, and therefore owe some tax. We work this out to be about £ [ESTIMATED UNDERPAYMENT] but we will check when we look at your tax return for the year to 5 April [TAX YEAR END DATE]. Once [EMPLOYER NAME] use the new code you will get a proportion of the new tax free amount (we tell them to use your new code on a special basis) and the tax taken off you should be right from then on |
| New K Code higher than
last operated code
And Wk 1/Mth 1 basis allocated And There is a PUP. For example, code K150 becomes K200, PUP £120 And SA signal on record | We have changed your tax
code and your “tax is due on” amount
for the year has gone up. This means that between
6 April [TAX YEAR START DATE] and the date [EMPLOYER NAME] used the
old code for the last time you will not have paid enough tax. We
work this out to be about £ [ESTIMATED UNDERPAYMENT] but we
will check when we look at your tax return for the year to 5 April
[TAX YEAR END DATE].
Once [EMPLOYER NAME] use the new code you will be taxed on a proportion of the new tax is due on figure (we tell them to use your new code on a special basis) and the tax taken off you should be right from then on. |
| New suffix or K code
higher than last operated code but remaining on a Week1 / Month1
basis with PUP reducing
And SA signal on record | We have changed your tax code again and your tax free amount for the year has changed. This means that between 6 April [TAX YEAR START DATE] and the date [EMPLOYER NAME] used the old code for the last time you will have had the benefit of too much tax free amount, and therefore owe a different amount of tax. We have worked the revised underpayment to be about £ [ESTIMATED UNDERPAYMENT] but we will check when we look at your tax return for the year to 5 April [TAX YEAR END DATE]. Once [EMPLOYER NAME] use the new code you will get a proportion of the new tax free amount (we tell them to use your new code on a special basis) and the tax taken off you should be right from then on. |
| New suffix code less than
last operated code
And Wk 1/Mth 1 basis allocated And There is a PUP. For example, code 500H becomes 385T WK 1, PUP £135 And SA signal is not set | We have changed your tax code and your tax free amount for the year has gone down. This means that between 6 April [TAX YEAR START DATE] and the date [EMPLOYER NAME] used the old code for the last time you will have had the benefit of too much tax free amount, and therefore owe some tax. We work this out to be about £ [ESTIMATED UNDERPAYMENT] but we will check after the end of the year and let you know. Once [EMPLOYER NAME] use the new code you will get a proportion of the new tax free amount (we tell them to use your new code on a special basis) and the tax taken off you should be right from then on. |
| New K Code higher than
last operated code
And Wk 1/Mth 1 basis allocated And There is a PUP. For example, code K150 becomes K200, PUP £120 And SA signal is not set | We have changed your tax code and your “tax is due on” amount for the year has gone up. This means that between 6 April [TAX YEAR START DATE] and the date [EMPLOYER NAME] used the old code for the last time you will not have paid enough tax. We work this out to be about £ [ESTIMATED UNDERPAYMENT] but we will check after the end of the year and let you know. Once [EMPLOYER NAME] use the new code you will be taxed on a proportion of the new tax is due on figure (we tell them to use your new code on a special basis) and the tax taken off you should be right from then on. |
| Wk 1/Mth 1 basis
allocated without a PUP and special note P91 is not present in CD
format 2
And The code does not contain NIB. For example the taxpayer has started a new job but has not handed in a form P45 and
Or
| We have told [EMPLOYER NAME] to use this code on a special basis. This is because we do not yet have details of any tax you may have already paid this year. When we do, we will tell [EMPLOYER NAME] who will check and if there is a repayment due to you, it will be paid on the next available pay date. Please contact us if you want to talk about this. |
Wk 1/Mth 1 basis
allocated without a PUP
And The code does not contain NIB. For example the
taxpayer has started a new job but has not handed in a form P45 and
Or
And
| We have told [EMPLOYER NAME] to use this code on a special basis. This is because we do not know if you have paid any PAYE tax already this year. We have asked you for your employment details since 6 April [TAX YEAR START DATE] but have not yet received your reply. When we do, we can find out and then ask [EMPLOYER NAME] to check your overall tax position. If there is a repayment due to you, it will be paid on the next available pay date. Please contact us if you want to talk about this. |
| New suffix or K code
higher than last operated code but remaining on a Week1 / Month1
basis with PUP reducing
And SA signal not on record | We have changed your tax code again and your tax free amount for the year has changed. This means that between 6 April [TAX YEAR START DATE] and the date [EMPLOYER NAME] used the old code for the last time you will have had the benefit of too much tax free amount, and therefore owe a different amount of tax. We have worked out the revised underpayment to be about £ [ESTIMATED UNDERPAYMENT] but we will check after the end of the year and let you know. Once [EMPLOYER NAME] use the new code you will get a proportion of the new tax free amount (we tell them to use your new code on a special basis) and the tax taken off you should be right from then on. |
| Code is for CY+1 | This tax code is for the year starting on 6 April next. |
Situations where there will be no computer
printed explanation on form P2
The computer will not print a standard explanation on the P2 in the following situations.
| Situation | Action you should take |
| Code change follows an in-year Budget | None. There is likely to be a centrally generated note. See PAYE14055 |
| NOTOP code is allocated by computer and full year's potential underpayment is coded out in CY+1 | If you decide to keep the NOTOP basis, enter the special note NOTOP and the amount in CD format 2. Further information on how to do this can be found at PAYE11035 |
| Only the suffix changes | None unless you wish to enter a freehand note or issue a letter |
| Potential underpayment to date of change more than £15 but potential underpayment from date of change to end of year is less that £100 | Decide whether you want
to change this basis. Take into account such factors as
|
| Suffix code increases (or K code decreases)and remains cumulative | None unless you wish to enter a freehand note or issue a letter |
| Suffix code decreases (or K code increases) but remains cumulative. This will be where the PUP is less than £15. | None unless you wish to enter a freehand note or issue a letter |
| Suffix code decreases (or K code increases), but the operator cancels the PUP | None unless you wish to enter a freehand note or issue a letter. |
