PAYE tax debt repayment limit increased
HM Revenue & Customs (HMRC) is to increase the amount of money it can take through PAYE to settle tax debts from April 2015.
At present, HMRC can recover up to £3,000 in tax owed by adjusting a taxpayer’s Pay As You Earn (PAYE) tax code. The process, known as coding out, can be used to recover tax debts from employees paying tax through PAYE and/or people receiving a taxable UK-based private pension.
The changes being introduced in April next year will not affect the £3,000 coding out limit for people earning less than £30,000.
But for people earning £30,000 or more, HMRC will apply a sliding scale to the taxpayer’s main PAYE income. For someone earning between £30,000 and £39,999.99, the coding out limit will rise to £5,000 and for someone earning £90,000 or more, HMRC will be able to recover a maximum of £17,000 through coding out.
These changes will only apply to underpaid self assessment and class 2 national insurance debts and tax credit overpayments.
Changes will be reflected in 2015-16 tax codes and HMRC will write to taxpayers before collecting debts through PAYE codes from April 2015.
Taxpayers who do not wish to pay debts through their tax code need either to repay the full amount owed or make a suitable payment arrangement with HMRC.