Employees who receive one-off or irregular payments should check their personal tax accounts and check whether they need to change their tax code numbers as the current system will treat them as recurring
The institute is stressing the importance of employees changing estimated income figures for the current and subsequent tax years if they have received such a payment as they could end up paying the wrong amount of tax.
Bonuses and other one-off payments to employees are included in estimated income for the year on personal tax accounts. Most payroll software does not contain a facility to tell HMRC that a payment is a one-off, which can lead to the misinterpretation of payments.
The ICAEW warns that employees who have received bonuses or other one-off payments do not check, incorrect code numbers could be issued, containing, for example, unwarranted restrictions of personal allowances and lead to overpayments of tax.
Under HMRC’s new Dynamic PAYE Coding system tax codes are now being issued more frequently to increase the number of employees who pay the right amount of tax via PAYE during the year.
Taxpayers can access their personal tax account by visiting www.gov.uk/personaltaxaccount and signing in using a Government Gateway ID and password. Taxpayers who do not already have a Government Gateway account can set one up straightaway. They should have to hand their national insurance number, a telephone number, and either a P60 or a payslip.
ICAEW’s blog can be read here.
