HM Revenue & Customs (HMRC) can now automatically update a customer's PAYE tax code with information from their Self Assessment tax return.
This guide explains what Self Assessment auto-coding is, when it happens, and provides answers to commonly asked questions.
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Auto-coding was introduced for Self Assessment tax returns for 2010-11 where customers had a PAYE source of income.
Auto-coding uses the information of other income and deductions from the return to calculate and issue a revised tax code automatically for the current tax year.
The process is quicker, so the tax code is corrected sooner and helps make sure your client pays the right amount of PAYE tax.
Self Assessment auto-coding makes sure that information is passed to PAYE systems to calculate tax codes for the current and following tax year between mid-January and mid-March. From mid-March to 5 April - when it's too late to issue a revised code for the employer to operate for current tax year - only the tax code for the following tax year is issued.
The earlier the tax return is sent, the sooner HM Revenue & Customs (HMRC) will be able to make sure that the right tax code is used.
You can find information about the different types of income, allowances and reliefs that can be included in your client's tax code from the links below.
Read about other income taxed through your tax code
Find detailed guidance on automatic coding in the PAYE Manual
The auto-coding process will not transfer details of:
This information will already be held on PAYE records and will be updated through other automated processes.
In exceptional cases where Self Assessment auto-coding can't calculate your client's tax code, the code is reviewed manually. This may mean that in some cases, more than one tax code is issued.
If any company benefits are included in your client's tax code then multiple coding notices may be issued, for example one when the P11D is dealt with and one when the tax return is received.
If an underpayment will be collected through your client's tax code, more than one tax code may be issued, for example one when the underpayment is coded and one when the tax return is received.
Your client can ask for tax due on other income not to be included in their tax code and pay any tax due through Self Assessment instead. They are given this option when they complete their Self Assessment tax return.
Question |
Answer |
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I have received a new tax code for a client as a result of sending their Self Assessment tax return, but their circumstances have changed. Can the tax code be amended to reflect this? |
Yes. You should contact HMRC with the information so the tax code can be recalculated and issued. In certain circumstances you will be able to view the changes to the tax code online. |
Can allowances or reliefs be removed from my client's tax code and dealt with at the year end or when their return is submitted? |
Your client's tax code must be based on the allowances and reliefs they are entitled to. If during the year it becomes clear they aren't entitled to an allowance or relief you can ask HMRC to update their tax code. |
If my client has provided more up-to-date income details for the current year prior to the Self Assessment tax return being processed, will auto-coding take this into account? |
Auto-coding will not override any information that has been updated by you or your client since the current tax year annual coding exercise. But any items that haven't been changed may still be updated by the auto-coding process where appropriate. |
| If a return for an earlier year is sent to HMRC, will this information be included in my client's tax code? | No. Only information from the previous year's return will be taken into account. For example, if the current tax year is 2012-13 and your client submits a return for 2010-11, the information will not be used to update their 2012-13 tax code. Only information from the 2011-12 return will be used. |
| Will the maximum K code and non-PAYE income restriction of £10,000 still apply? | Yes. Where non-PAYE income requires a tax code adjustment of more than £10,000, only the first £10,000 will be collected through the tax code. The rest will be paid through Self Assessment. |
| Why are the income levels being used to work out my client's personal allowances incorrect or out of date? | While the PAYE system uses the latest information from the Self Assessment tax return, the auto-coding process doesn't update estimated income. Currently this is done at annual coding (when the P14 is available) or when you or your client provides HMRC with more up-to-date information. |
| Why have deductions for non-PAYE income been included in my client's tax code when a note was included on the return asking for these not to be coded? | Box 3 on the Self Assessment tax return or Box 12.13 on the Short Tax Return must be ticked if your client doesn't want non-PAYE income not be coded. |
