JGA often hear about employees having to make additional payments to HMRC for underpaid tax, or in the more fortunate cases, employees receiving a refund for overpaid tax.
Tax errors can occur for a number of different reasons; one common cause is the incorrect allocation of a tax code, especially for new employees.
To resolve the issue of incorrect tax codes, HMRC have created an online tool to help employers and payroll providers get the correct tax code from day one for new employees.
To work out the tax code for a new employee you need to collect certain information that will normally be found in a P45, so it’s important that you ask them to bring this information with them on day one. This information will also be required to assign a starter declaration, a key requirement for any payroll software.
On some occasions you will find that a P45 is not available and with the P46 forms no longer be used, the HMRC advise that you ask new starters to complete the HMRC new starter checklist.
So once you have obtained all of the necessary information you can simply use the online tool to ensure that the correct tax code and starter declaration are assigned, avoiding the need for any payroll adjustments at a later date, making life easier for everyone.
The tax code tool can be found at the following address: – https://www.gov.uk/new-employee-tax-code