PAYE76055 - PAYE operation: pensioners: K codes and state pensions

The primary intention of K codes is to collect tax on benefits in kind and state benefits. However there may be cases where the inclusion of the state benefit generates a K code above the 50% limit. In these cases where NIB is the only deduction in the code, the NIB should not be reduced. The correct amount of NIB should be coded.

If the limit is only exceeded in one year the underpayment may be collected by means of a voluntary payment or coded if practical to do so. Where the 50% K code limit is constantly being exceeded you should consider putting the case into SA.

Where the K code exceeds the 50% limit the code still operates but the employer limits the deduction to 50% of the pay or pension and any underpayment is dealt with after the year end. This will be by open case review in non-SA cases and SA for others.

Further information on K codes can be found at PAYE14050.