A self-assessment tax payer who has a current employment can ask that the balance of tax due on his/her tax return to be coded out if it is less than £3,000.
What this means is that rather than having to find the money on 31 January their tax code will be adjusted for the following tax year and essentially they will pay back this money each month over the next twelve months.
Although many tax payers prefer just to pay the bill to get it out of the way, for some this is a very useful interest free credit line especially where the amount payable was completely unexpected.
Under the PAYE system, HMRC should collect the right amount of tax if they are aware of all the other employments or self-employments that an individual may have. However, with all the best will in the world, this system does not always work and tax payers sometimes find themselves with a liability they were not expecting.
The crucial point here is that if you have a balancing payment of under £3,000 that you would like to be coded out you have to file your return before 31 December and also tick the box claiming that you would like the coding out to be done, otherwise you will not have made the claim in time.
Should you need any help with this, please get in touch.
