6th April 2016 marks the start of the new tax year and for most employees, the new tax code will be 1100L which should mean a welcome increase in take-home pay.
Tax code for 2016/17
For most UK employees, the standard tax code for the 2016/17 tax year will be 1100L. This tax code tells your employer that you are entitled to earn £11,000 per year before you are required pay tax.
Tax free personal allowance for 2016/17
Almost everyone living in the UK is entitled to a tax free personal allowance. This allowance allows you to earn up to a certain limit without having to pay any tax.
For 2016/17, the standard personal allowance is £11,000. This means that if you receive income from a job or pension, the first £11,000 you are paid will be tax free.
It is important to understand that your tax free allowance is usually split evenly over the year (i.e. rather than waiting until you exceed your personal allowance). The tax system is designed this way to ensure you pay a consistent amount of tax each pay period.
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Will I receive confirmation of my new tax code from HMRC?
HMRC normally send out a PAYE coding notice when your tax code changes during the year. They will not normally send you this notice if you are on the standard tax code at the start of a tax year.
Your employer’s payroll department will automatically update your code to the standard code unless told otherwise by HMRC.
What if my tax code is not 1100L?
A tax code is based on your individual circumstances and may not be 1100L. If you are not on a standard tax code, HMRC will usually send you a PAYE Coding notice shortly before the end of the tax year to explain how they calculated your new tax code.
Common reason why your tax code may not be 1100L:
- You have more than one job (so your personal allowance is split across each job).
- You have a underpayment from a previous year which is being collected through a reduced personal allowance.
- You receive company benefits from your employer (such as medical insurance or company car).
If you believe your new tax code is wrong, you can fill in the following form to query it with HMRC https://online.hmrc.gov.uk/shortforms/form/P2
Claiming a tax rebate for previous year
Whilst HMRC stipulate that it is the taxpayers responsibility to ensure they are on the right tax code, they will normally perform an end of year reconciliation to ensure you have paid the right amount of tax. Any overpaid tax is normally refunded automatically.
However, the system is not 100% accurate as it relies on HMRC having the correct information. In some instances, it may be necessary to initiate a tax rebate claim.
For example you may be entitled to a rebate for previous years because you have not claimed all your additional tax free allowances, such as laundry allowance, mileage allowance and the cost of professional fees and subscriptions – these can only be awarded by making a claim. You could find yourself being owed £100’s back!
You can use our free tax rebate calculator to see if you are entitled to claim a rebate for previous years. Over the past 2 years, we have found over half tax codes we have reviewed have been incorrect and resulted in a repayment for the client!
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