50% regulatory limit on tax codes

09 February 2015

A member has sought clarification from the Policy Team regarding the regulatory limit of 50% on tax deductions.

In the December HMRC Employer Bulletin, an item on page 7 talks about HMRC increasing the maximum amount that can be recovered through an employee’s PAYE tax code each year – known as coding out. The item goes on to say:

“To ensure a consistent approach, and to safeguard employees from excessive deductions from their pay, HMRC is extending the ‘legislative 50 per cent overriding limit’ to include all tax codes, and not just K codes. This limits any deductions to a maximum of 50 per cent of an employee’s relevant pay.”

Specification for PAYE tax table routines v13 issued October 2014 page 5 confirms that amendments have been included to take into account the change to the 50% overriding Regulatory limit which previously only applied to K codes. From 6 April 2015 the 50% overriding Regulatory limit will be extended to all tax codes.

We look forward to seeing updated guidance on the subject in the Employers Further Guide to PAYE and NICs CWG2 (2015) when it is published shortly.

For further detail of the consultation ‘How to improve HMRC’s collection of debt: coding out’ and the subsequent government consultation response which was issued in February 2014 please follow the links.

Thank you to member Alex Rowson for his assistance with this matter.