Employees who receive bonuses should visit their personal tax accounts to prevent wrong code numbers being issued

Employees who receive irregular payments, for example periodic bonuses, may receive wrong code numbers and should visit their personal tax accounts (PTAs) to check and if necessary change estimated income figures for the current and subsequent tax years.

Bonuses and other one-off payments to employees are included in estimated income for the year on PTAs. HMRC’s systems are likely to interpret such one-off payments as recurring because most payroll software does not contain a facility to tell HMRC that a payment is a one-off.

We recommend that employees who have received a bonus, or other one-off payment, should check the estimated employment income figures on their PTAs and correct if necessary. If they do not do so excessive estimated income for the year arising from one-off payments being treated as recurring may result in the issue of incorrect code numbers, containing, for example, unwarranted restrictions of personal allowances, leading to overpayments of tax.  Under HMRC’s new Dynamic PAYE Coding system tax codes are now being issued much more frequently to increase the number of employees who pay the right amount of tax via PAYE during the year.

Taxpayers can access their personal tax account by logging onto www.gov.uk/personaltaxaccount and signing in using a Government Gateway (GG) ID and password. Taxpayers who do not already have a GG account can set one up straightaway. They should have to hand their national insurance number, a telephone number, and either a P60 or a payslip as certain details on these will be needed. These documents are needed only when signing up for the first time. Subsequently, all that is needed is the GG ID and password, plus an access code that will be sent by text to their phone each time they log in.