The tax code at the start of the new tax year comes with different compliance requirement which includes changes in the tax code.
In Uk, the tax year begins on the 6th of April every year.
we would be explaining some of these changes.
The tax code in the new tax year.
In 2018/19, the personal allowance for every individual is Uk is £11,850.
The personal allowance is the tax-free amount of an individual’s income.
The personal allowance for each year is the base for each individual’s tax code.
The tax code for 2018/19 is 1185L,(This is deducted from 11850).
This code may also be increased or decreased.
Reduction or increase
The code may be reduced because of benefits received at work such as car benefits e.t.c.
This may also be reduced by dividend tax.
Another reason for reduction may be due to unpaid tax from previous years, e.t.c.
If you are unsure as to the reason why your code is changed, I would advise you to call HMRC or get professional help.
This may be increased due to several other adjustments such as charity giving.
It could be increased from contributions to personal pensions, professional subscriptions,work-related expenses e.tc.
Changes in the tax code due to changes in personal circumstances.
When there is a change in an individuals circumstances, it’s always advisable to call the HMRC.
There are consequences to having the wrong code.
It could create an overpayment or underpayment of tax.
This could create an unnecessary financial burden either by paying too much tax or debt.
This debt is created by the underpayment of the tax from the tax year.
An individual is only permitted one full tax code within a tax year.
When an individual has multiple employment, the full code can only be applied to one job.
An employee has the option to apply their code to one job or share. The employee would have to call HMRC with their estimated employment incomes.
How to understand your tax code.
A form P2 is usually sent by the HMRC at the start of each tax year.
This form explains how an individual code is been calculated.
Every individual is responsible for their own tax.
It’s always advisable to check one’s tax code always.
Doing so ensures that the right amount of tax is paid.
If you would like us to support you with accounting and tax compliance issues, kindly contact us