29/07/2017
HMRC - Dynamic Coding
On 2nd July 2017, HMRC launched the new system of Dynamic Coding.
What is Dynamic Coding?
PAYE tax codes are becoming more refined. Under the system of dynamic coding, potential underpayments are replaced with in-year adjustments (IYAs). The tax codes are adjusted in-year to reflect changes in an employee’s circumstances as soon as HMRC becomes aware of the change. In other words HMRC clawback any under payments and repay any overpayment in the year they occur instead of the future tax year as is the status quo.
This mostly affects those who are in employment, but it will also affect those who are both employed and self-employed. If your self-employment tax bill is less than £3,000 you can opt to have your tax code altered to collect this via your employment pay. This currently happens in the following tax year, dragging out the repayment process long after you have incurred the tax.
Under the new scheme of Dynamic Coding, HMRC will remedy any under/overpayments within the tax year they occur.
Another good reason to prepare your self-assessment tax return nice and early in the tax year as HMRC will ensure you are refunded any monies owed rather than waiting!
