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Breaking the
Code
The national newspapers carried a story earlier this year about changes to PAYE that might mean people paying 50% of their salary in tax deductions. The Revenue denied that anything had changed. Who was right? Both and neither, of course.
All employees should receive a 'notice of coding' which sets out their personal allowances - the amount of salary that they can receive tax-free. If they have income from sources other than the job, the personal allowance can be set off in the coding against that, so the employee doesn't have to make a separate payment of tax on it. This works very well if the other income is small, because it's easier to pay through PAYE than to fill in a separate tax return for a few pounds.
The rules have changed to make it clearer that the Revenue can put any other source of income on the coding notice, even if it's very large. So they might - in theory - try to collect the tax on £100,000 of rental income from a salary of £20,000. There is a limit on the amount of PAYE that can be collected - that's where the 50% comes from.
The rules have changed, so the journalists were right. However, the rules still give the employee the right to object. You can ask for other income to be removed from your coding notice, which means that you pay the tax later (for the cost of having to fill in a tax return). In the past, when it wasn't clear that the Revenue could put large non-employment sources on the return, that's what used to happen - the Revenue might put it on, the taxpayer could object, the Revenue would take it off again.
If your coding has changed significantly from last year, we will be happy to look at it and discuss your choices with you.
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