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Paying a self-assessment liability via PAYE code

Notwithstanding all of the tax administration alterations which have come in (and are planned) – such as personal tax accounts and tax return pre-population measures – the old option of paying a self-assessment liability via the PAYE code still subsist.

However, there have been a number of alterations to the policy over recent years. This article sums up the key points and will aid ensure you and your clients are fully alert of how it now works.


Essentials – the option can only be used if:

·         the tax owed is less than £3,000

·         the taxpayer already pays tax through PAYE, for example as an employee or in receipt of a company pension. (Note that the online tax return must have been presented by 30 December and be very careful if the client’s tax return has not yet been submitted as the payment option is now not available.)

The amount of income received/PAYE paid is relevant to whether the option can be used. The PAYE code option can’t be used if:

·              there is not enough PAYE income for HMRC to gather the tax owing

·              using the option would mean that the taxpayer would pay more than 50% of their PAYE income in tax

·              the taxpayer would anyways pay more than twice as much tax as they normally do

·         Class 2 NIC contributions can only be paid through the PAYE code if they were compulsory starting before April 2015.