HMRC’s new interactive tool responds to information provided by the taxpayer to give additional explanations relating to their tax code. This includes situations where a taxpayer’s tax code has changed. For example, this can be due to the receipt of taxable benefits from their employer, changes due to additional sources of income, underpayment of tax and receipt of the state pension. The tool also provides instructions to taxpayers where further action is required on their part.
Individuals who pay tax through pay as you earn (PAYE) are issued with a tax code. This allows their employer to calculate how much tax to withhold on their earnings in each payment period. This also applies to taxpayers receiving pension payments.
Many taxpayers within PAYE currently receive a P2 form, more commonly known as a tax coding notice. The P2 form sets out the taxpayer’s tax code, how HMRC has calculated the tax code and how to contact HMRC if the tax code is incorrect. It also includes notes explaining each element of the tax code calculation.
The interactive tool is not intended to replace individual P2 forms, which will continue to be sent by post or through a taxpayer’s personal tax account.
The roll-out of the interactive guidance chimes with HMRC’s increasing push to engage with taxpayers via digital channels.
As this is a new tool, ICAEW would welcome feedback. Please send feedback to Peter.Bickley@icaew.com
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