If you receive a pension or are paid a wage or salary, you should have a new PAYE tax code for 2018/19. It used to be issued in paper form, but now it may arrive electronically if you have activated your personal tax account at www.gov.uk/personal-tax-account. In that case, you will get a notification to go to your personal tax account and check your new PAYE code.
Please do take the time to check it, as an incorrect PAYE code will mean you could pay too much or too little tax. The key items to look out for in the calculation are: dividend tax and untaxed interest.
HMRC receives details of the interest paid by banks and building societies to individuals. In the past it has used this information to check that taxpayers were reporting the correct amounts of interest on their tax returns.
This year HMRC has used the 2016/17 interest data as a proxy for interest expected to be received in 2018/19, and it has amended taxpayers’ PAYE codes accordingly.
HMRC shouldn’t be using interest paid into joint accounts to populate your PAYE code, but the fact that an account is jointly held may not have been accurately reported by the bank. If you have a joint savings account, you should check that your share of the interest received is included in your personal tax computation.
When you receive a significant amount of interest in one tax year, you need to pay tax on at least part of that income, as banks no longer deduct tax at source from interest. HMRC may have included the untaxed interest in your PAYE code so you can pay the tax gradually throughout the year.
You don’t have to pay tax on modest amounts of interest received, where that income is covered by your personal savings allowance of £1,000 (£500 if you are a higher rate taxpayer). If you have a low level of earnings or pension income, your interest may also be covered by your savings rate band of £5,000.
If you believe the figures in your PAYE code are incorrect you can ask for the code to be changed by accessing your online personal tax account. If you haven’t discovered how to do that we can take you through the process, or contact HMRC on your behalf.