You can have tax underpayments collected via an adjustment to your PAYE tax code, provided you are in employment or in receipt of a UK-based pension. The coding adjustment applies to certain debts such as Self-Assessment liabilities, tax credit overpayments and outstanding Class 2 NIC contributions.
Instead of paying off debts in a lump sum, money is collected in equal monthly instalments over a tax year.
The amount of debt that can be coded out ranges from £3,000 to £17,000 based on a graduated scale. This is a different limit to that for paying your Self-Assessment bill where the amount owed must be less than £3,000. The maximum coding out allowance only applies to taxpayers with earnings exceeding £90,000.
The full breakdown is as follows:
| Earnings | Coding out limit |
| Less than £30k | £3k |
| £30k to £39,999.99 | £5k |
| £40k to £49,999.99 | £7k |
| £50k to £59,999.99 | £9k |
| £60k to £69,999.99 | £11k |
| £70k to £79,999.99 | £13k |
| £80k to £89,999.99 | £15k |
| £90k or more | £17k |
If you had tax underpayments in the 2018-19 tax year, you have until 30 December 2019 to file your Self-Assessment returns in order to have the monies collected in the 2020-21 tax year – starting on 6 April 2020.
If you need help organising the payment of your tax bill – to be paid off by an adjustment to your tax code – call now as the December deadline is fast approaching.