The legislation that allows HMRC to increase the amount of debt that can be recovered through an employee’s tax code came into effect on 1 November. A graduated income-based scale will apply if the employee has a primary source of income of £30,000 or more each year. There is no change to the £3,000 limit for earnings less that £30,000. The graduated scale is shown in the table below:
Earnings Coding out limit
Up to £29,999 £3,000
£30,000 to £39,999 £5,000
£40,000 to £49,999 £7,000
£50,000 to £59,999 £9,000
£60,000 to £69,000 £11,000
£70,000 to £79,000 £13,000
£80,000 to £89,000 £15,000
£90,000 or more £17,000
The changes only apply to unpaid self-assessment, class 2 NIC debts and tax credit overpayments. The current £3,000 coding out limit will still apply for self-assessment balancing payments and PAYE underpayments.
To safeguard employees from excessive deductions from their pay, the 50 per cent overriding limit is being extended to include all tax codes. This limits any deductions to a maximum of 50 per cent of an individual’s relevant pay.
The new limits will be included in coding notices for 2015-16 and the first deductions from income will start in April 2015.