Well, who would have ever thought that the words “dynamic” and “tax” would sit together but these are crazy times.
Since the end of July; HMRC have moved to a “dynamic coding” environment. This means they are now going to amend your tax code every time there is a triggering event.
A triggering event, my goodness, we were keen to find out what that might mean. Well, it means lots of tax codes, lots and lots of tax codes, oodles of them, tax codes everywhere, more than enough to paper the walls of Trump Towers. Are you catching my drift?
Triggering events include the submission of a P11D showing BIKS. Well that’s fair enough – but this is only an annual event, so why so many?
All the others seem to be to do with estimated annualised pay. Each time we submit employees’ pay, HMRC re-calculates their estimated annualised pay. If a change in this estimate affects the estimated annual tax calculation, they get a new code.
Just consider; we only send HMRC total gross pay figures. HMRC cannot differentiate between standard pay and overtime or bonus or deductions for absence. So each time such a payment or deduction occurs, potentially, they amend the estimated annualised pay.
So, if you are a higher rate tax payer and have fluctuations in your earnings, BIKS , move jobs, get a big bonus, fail to get a big bonus, change your car, start paying into a pension – basically do anything different, these are all likely triggering events. Get ready for more brown envelopes. We cannot see a slowdown in these happening any time yet.
If you want to get involved with this joyous process (who could resist?) and see what HMRC are doing to your tax code each month then see next page for more info.