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HMRC internal manual

PAYE Manual

Coding: coding deductions and expenses: notification of new source of non-PAYE income received by customer contact (Action Guide)

Individuals who notify new sources of non-PAYE income will normally not be within SA. When notification is received, either by telephone or face to face, follow steps 1 - 3 below depending on whether they have already received an SA tax return for the year.

The guide is presented as follows

  Step 1
  Steps 2 - 3

Note: Whether or not agreement to coding out has been received, you must not include an amount in excess of £10,000 without specific authority. If you are able to obtain agreement from the customer to coding of an amount in excess of that limit, make an SA note and proceed to code accordingly.

Individuals already within SA

1. For individuals already within SA remind them of the option they selected at box 23.1A on their 2006-2007 SA return or, for SA returns for 2007-2008 onwards, Tax Return XXXX / Finishing your Tax Return page TR5 Box 3 (TR5 box 3)
  * Where they have not ticked the box
  * Code out the new source for CY, together with any existing coded amount, and subject to the limit of £10,000, any balance above £10,000 must be included in the non-coded income field (see PAYE130035)
  * Where an SA individual does not wish to have additional tax on non-PAYE income collected through their code
  * Make a prominent SA Note confirming this
  * Remove the restriction from the code

Individuals outside of SA at the time of notification

  There are two ways to collect the additional tax due on non-PAYE income
2. By an adjustment to their tax code
  * If the individual accepts this, the first adjustment should be made to the code for CY
  Note: This is an alteration to procedures where notification is made in writing where you would only code CY+1. This is because, in cases of written notification, there is not the opportunity to check with the individual whether they are content that we adjust their code for the current year.
3. If the individual does not wish to have tax deducted in respect of non-PAYE income through their code
  * Set-up a new SA record
  * Inform the individual that their returns will need to be completed

Note: It is not necessary to set the Inhibit Auto Closure signal where the individual does not wish to have tax deducted in respect of non-PAYE income through their tax code.

The Inhibit Auto Closure signal should only be set where the circumstances as described at SAM101140 apply.