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HMRC internal manual

PAYE Manual

From
HM Revenue & Customs
Updated
, see all updates

Coding: coding: general principles: automatic coding of state pensions and benefits

This subject is presented as follows

General

State pensions and benefits are increased in April each year. The DWP supplies the uprating details on magnetic tape, which gives the revised details for

  • Only those pensioners within the uprating service

And

  • All cases where the code includes a deduction for employment and support allowance or incapacity benefit

When the uprating details are available, the computer carries out the Automatic state pension / benefits coding. The system

  • Reviews records which include a state pension / benefits in coding

And

  • Revises the deduction

The review usually takes place towards the end of January, after the Annual Coding Main Review. The Annual Coding Business Guidance Note (BGN) gives the exact dates each year.

The system reviews all live and leaver records which include a deduction in the coding for state pension / benefits and incapacity benefit. It ignores those records where the deceased indicator is set.

System action

The system identifies cases where the following year’s coding includes a deduction for state pension / benefits or incapacity benefit.

Where an individuals tax code contains more than one benefit type NPS will only allow one benefit type to be carried forward to CY+1.

To do this NPS will use the following priority order to determine which benefit should remain

  • 1 State Pension will be coded above Employment and Support Allowance and Incapacity Benefit
  • 2 Employment and Support Allowance will be coded above Incapacity Benefit
  • 3 Incapacity Benefit will be coded where no other benefits are held

When the benefit to be carried forward has been determined

  • The deduction will be revised

    • Using the new annual rate on the DWP uprating tape

    Or by

    • Increasing it by the correct percentage increase announced by the Government
    • It will not update cases which have the static state pension / benefits indicator

Automatically sets

* The actual state pension / benefits indicator or the actual employment and support allowance or the actual incapacity benefit indicator, where it uses the DWP uprating amount

Or

* The estimated state pension / benefits or estimated employment and support allowance or estimated incapacity benefit indicator, where it uses the percentage amount

You can set both these indicators manually during day to day work in the income, allowances, benefits and deductions area.

Work items

After the uprating, the system will generate work items for you to review.

The following tells you what the work items are and why they are produced.

183 - Annual Coding - update NIB -IB shown Generated when the DWP file shows state pension / benefits to be updated but the individual’s record has incapacity benefit in the CY+1 tax code. The work item Action Guide is at PAYE13014.
   
184 - Annual Coding - update IB - NIB shown Generated when the DWP file shows incapacity benefit to be updated but the individual’s record has state pension / benefits in the CY+1 tax code. The work item Action Guide is at PAYE13015.
187 - Annual Coding - update NIB - primary EMPT live at (This content has been withheld because of exemptions in the Freedom of Information Act 2000)   Generated when the DWP file shows state pension / benefits to be updated but the individual’s primary employment is live at (This content has been withheld because of exemptions in the Freedom of Information Act 2000) . The work item Action Guide is at PAYE13016.

Using percentage increase for following year

The system always makes a percentage increase if any of the following apply

  • A temporary reference number, rather than a National Insurance number is present
  • The National Insurance number on the record and on the DWP list do not match
  • The state pension / benefits deduction for the current year exceeds the DWP amount for that year (this check is not carried out for Incapacity Benefit cases)
  • There is a state pension / benefits deduction in the coding, but the case is not included on the DWP tape (this check is not carried out for Incapacity Benefit cases)
  • The benefit description does not match

The system will set the estimated state pension / benefits or estimated incapacity benefit indicator for these cases.