Employees who receive a bonus should review their personal tax accounts to prevent wrong tax code numbers being issued, the Institute of Chartered Accountants in England and Wales (ICAEW) has warned.
In its latest blog, the regulator said employees who receive irregular payments – such as annual bonuses – may receive the wrong code numbers as a result of new dynamic PAYE coding.
That’s because one-off payments may be treated as regular income, and HM Revenue & Customs (HMRC) will tax them as such.
Employees can visit their personal tax accounts (PTAs) to change estimated income figures for the current and subsequent tax years.
The institute said: “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 PTA by clicking here and signing in using a Government Gateway ID and password.