What happens when an employee queries their tax code? Should we be explaining this to employees?
Many payrolls will be paying for the first time in the 2016-17 tax year at the end of this month. An equal number of payrolls will have already been processed and paid. There are always queries from employees at the start of the new tax year, simply as a result of the number of changes that we have to implement – tax bands, the end of contracting out, changes to the student loan threshold, and so on. I believe that we do have a professional responsibility to explain all of these things to employees.
However, what about when an employee queries their tax code? Should we be explaining this to employees as well? This is a tricky one for UK payroll professionals. On the one hand, there are some things that are ‘generic’, can easily be explained and the information is in the public domain anyway. For example:
• What is a tax code?
• What do the numbers mean?
• What do the letters mean?
I think it is professionally responsible to be in a position to give employees this information, by nicely telling them where to go. There is nothing secret or confidential about Gov.uk’s Understanding your employee’s tax code, so point them there.
On the other (larger) hand, there are questions that are bespoke to the individual, for example:
• “I think I should have an S prefix code. Why haven’t I?”
• “Why have I gone to 1100L when I should be on 0T?”
• “I was on D0 last year and I have gone to BR. This means I am not paying enough tax, doesn’t it?”
• “HMRC have included two company cars in my tax code, why is that?” or just simply…
• “Why have you operated that tax code and made me pay more tax?”
These cannot be explained by generic guidance and I question if we should be even attempting to try and answer them. It would be lovely to be able to have the time for one thing but, importantly, are we qualified to be able to do it? We are not financial advisors and the tax code is a personal responsibility.
For many of us, gone are the days that we actually see the tax codes at the time we enter them into the payroll system. We simply download them and hope that HMRC have done it correctly!
So, after checking we have correctly operated the last tax code that HMRC advised us of, I think we need to make it clear that it is a personal responsibility and we have a statutory obligation to operate the tax code that HMRC tell us to use. Then, we can still be professionally responsible and point our employees to the two main ways to query their tax code:
1. They can telephone HMRC on 0300 200 3300 and, if they get through, tell them to ignore any advice saying that they should contact their employer – or
2. Use the online 2016-17 PAYE Coding Notice query online form, for which they will need their National Insurance number and PAYE reference