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HMRC can currently collect self assessment tax debts of up to £3,000 by adjusting your Pay As You Earn (PAYE) tax code, which effectively spreads the collection of this debt over the whole tax year from your employment/pension income, provided your tax return is submitted electronically by 31 December.

If your earnings are less than £30,000, the £3,000 debt collection limit will continue.  However, if your earnings exceed £30,000, HMRC will be able to collect up to £17,000 of self assessment, class 2 NIC or tax credit overpayments from your employment/pension income each year from 6 April 2015.

The level of debt that can be collected in this way will be calculated on a sliding scale, with you having to earn at least £90,000 for the full £17,000 limit to apply, and will be limited to 50% of an individual’s relevant pay.  Whilst debt collection in this way can help with cash flow, it will be even more important to check your tax code in case HMRC estimate any tax debts to be collected in this way.

If you need help with checking your tax code, please do get in touch.

Sliding income scale:

Annual PAYE earnings        Coding out limits
Less than £30,000                       £3,000
£30,000 – £40,000                     £5,000
£40,000 – £50,000                     £7,000
£50,000 – £60,000                     £9,000
£60,000 – £70,000                     £11,000
£70,000 – £80,000                     £13,000
£80,000 – £90,000                     £15,000
More than £90,000                     £17,000

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