Tax codes for the new tax year will be slightly different for 2015-16, which means you will have to check them carefully to make sure you pay the correct amount over the next 12 months.
The basic personal allowance for the year 2015-16 will be £10,600, which means most people will be able to have an annual income up to that amount before paying any tax. If you are either married or in a civil partnership, you may be able to benefit from your partners unused tax allowances. If one person doesn’t use all of their personal allowance, up to £1,060 can be transferred to their partner. To qualify for this, both parties must be basic rate taxpayers. Although claims must be made to HMRC online, the system isn’t currently ready to accept applications so claims must be submitted later in year. Once tax codes have been amended to show the transfer of allowances, the tax code suffix will change from the letter ‘L’ to ‘M’ for the person receiving the spare allowances and ‘N’ for the partner giving the spare allowances away.
Higher rate tax changes
Currently, underpayments of tax can be collected through an individual’s tax code as an adjustment. For people with earnings up to £30,000 per annum, the maximum amount of underpayment will remain static, at £3,000. However, for those who earn above this amount the underpayment limit is set to increase from 6th April 2015. For every £10,000 above the threshold of £30,000, the possible underpayment limit will be increased by £2,000. The maximum underpayment that can be included in a tax code will be £17,000 for people who earn over £90,000 a year.
Emergency tax code
Previously, HMRC has informed taxpayers if their tax code has been operated on a ‘week one’ or ‘month one’ basis, also known as the emergency tax code. However, this is changing and you will no longer be notified. This is most likely to occur when you start new employment, are a student, have part-time employment or multiple income sources. Although it may be necessary at times to place a tax code on a week or month one basis, you should contact HMRC if you believe this is incorrect.
Tax is a complex subject and it is relatively easy to underpay or overpay. If you believe your tax code may be incorrect, contact us here at the Accountancy Partnership for a bit of impartial advice.
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