Increasing the limit for coding underpayments to £3,000

HMRC have issued a short briefing note with information for self assessed taxpayers or agents acting on their behalf about the increased limit for coding underpayments. This briefing note is reproduced here.

Increasing the limit for coding underpayments to £3,000

You will already be aware that the Exchequer Secretary gave his consent to raising the coding out limit of tax owed from below £2,000 to £3,000. The new Regulations took effect from 20 July 2011 allowing HMRC to collect up to £3000 of tax owed through the PAYE tax code.

The revised underpayment coding out limit applies to non-SA underpayments from 2010-11 onwards. So for example, a 2010-11 informal tax calculation (P800) issued after October 2011 showing an underpayment of less than £3000 will automatically be included in the 2012-13 tax code (subject to there being sufficient PAYE income from a continuing employment/UK based pension).

However, because the necessary changes to legislation did not come into effect until July 2011, the 2010-11 Self Assessment Returns could not be amended to reflect the increase before they were issued because the resulting changes to our automatic Self Assessment processes were still being worked through. This means that the current coding out limit of £2,000 will remain in place for the 2010-11 Self Assessment Return

HMRC does recognise however that some Self Assessment customers with balancing payments between £2,000 and £3,000 might like to take advantage of the increased coding out limit and have it reflected in their 2012-13 tax code. Agents with clients in this position should contact HMRC through their dedicated telephone number by 30 December 2011 to discuss whether a balancing payment can be coded out in this way.

There will not be the option to request retrospective coding out in those cases where customers have already paid or agreed a repayment plan to settle outstanding tax.

Technical Team

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