Another Way of HMRC Collecting Outstanding Tax

HMRC have received new powers this week that will enable them to collect tax owed to them through the PAYE system.

Previously, the most that HMRC have been able to collect through the tax code of an individual is £3,000. The new powers increase this limit to £17,000.

HMRC have been pushing for this increase for a long time now. The increase of the threshold will mean that HMRC will be able to avoid other ineffective and costly debt collection methods.

Obviously, the £17,000 threshold will be considered high by many, if not most, individuals. It is for that reason that the new rules will not affect those earning less than £30,000. For those earning £30,000 or less, the current threshold of £3,000 will remain intact.

For individuals who earn between £30,000 and £90,000, HMRC will use a sliding scale to decide how much they are able to collect through the tax code. The full £17,000 can be collected through the tax code if the individual earns more than £90,000.

It has also been agreed that HMRC will not be able to collect tax that equates to more than half of the taxpayer’s salary.

It is anticipated that these new rules will assist HMRC in reclaiming £115 million in the 2015/16 tax year.

Taxpayers who will be affected by these new rules will be informed in the early part of 2015 when the new tax codes are issued for the 2015/16 tax year, which starts on the 6th April 2015.

Whilst the new limits may seem extreme, they may be appreciated by some taxpayers. It will enable them to pay their tax debt evenly over twelve months, rather than having to repay the debt on demand by HMRC.

The increase in the limit to £17,000 has also been overshadowed by the news that HMRC may be able to start collecting any tax owed directly from the taxpayer’s bank account.

Pointers

  • HMRC can now collect up to £17,000 of owed taxes through PAYE
  • Previously the limit was £3,000
  • For those earning less than £30,000, the £3,000 limit remains in place
  • A sliding scale will be used to decide how much to collect from those earning between £30,000 and £90,000
  • The full £17,000 can be collected if the individual earns more than £90,000
  • HMRC will not be able to collect tax that equates to more than half of the taxpayer’s salary
  • Taxpayers affected by these new rules will be informed in early 2015

Apr 16, 2015