HMRC have launched two new services to help people understand their PAYE codes and claim tax relief that they may be entitled to.

PAYE Tax code checker

All employees should have a PAYE tax code. The codes are set by HMRC and tell employers how much tax to withhold when paying salaries.

New tax codes normally arrive through the post, or via an employee’s Personal Tax Account if they’ve chosen to receive digital communications instead. The codes are important as they affect how much of pay the employee takes home and how much tax is sent to HMRC. But to some taxpayers, their PAYE code just looks like a random collection of numbers and letters, meaning they won’t necessarily spot any issues with it that could lead to them paying the wrong amount of tax.

To address this problem, and to help employees pay the correct tax due each year, HMRC have launched a new service called Check what your tax code means. The online tool asks the taxpayer some basic questions about their circumstances (eg whether they live in England, Northern Ireland, Wales or Scotland, and what their approximate salary is) and asks them to input the numbers and/or letters shown on their tax code.

Once completed, the tool will explain what the letters and numbers mean and tell the employee how much tax they’ll pay based on their tax code. It will also explain the implications if a tax code has changed recently. If anything doesn’t look right, guidance is signposted on how employees can request changes to their code.

Marriage Allowance 

If one person in a married couple or civil partnership earns less than £12,570 (the tax-free personal allowance), a claim can be made to transfer 10% of their personal allowance to their spouse/civil partner. This allows the higher-earner to benefit from part of their spouse or civil partner’s personal allowance, which would otherwise be wasted, and can mean the couple pays less tax overall.

To be eligible, the higher-earner must be a basic rate taxpayer in England or Wales (taxable income less than £50,270) or a basic, starter or intermediate rate taxpayer in Scotland (income less than £43,662).

There are a number of ways to claim the transferable Marriage Allowance, but HMRC have recently launched a simple form to apply by post. The form needs to be completed by the lower-earning spouse/civil partner and can either be filled in on-screen and printed for posting, or filled in by hand before posting back to HMRC.

Taxpayers eligible to claim the Marriage Allowance can claim not only for the current tax year but also backdate the claim by a further four tax years provided they met the conditions in those years. The higher-earner in the couple should receive a repayment of tax from HMRC once the claim has been processed. Going forward, the relief should be included in the higher-earner’s PAYE tax code, which they can check using the Check what your tax code means tool covered above.

This article reflects the position at the date of publication (15 August 2023). If you are reading this at a later date you are advised to check that that position has not changed in the time since. 

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