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On 20 July, the HMRC limit for coding underpayments was increased to £3,000 from £2,000. This applies to non-self assessment underpayments from 2010/11 onwards.
However, because the necessary changes to legislation did not come into effect until July 2011, the 2010/11 self assessment returns could not be amended to reflect the increase before they were issued because the resulting changes to HMRC’s automatic self assessment processes were still being worked through.
This means the current coding-out limit of £2,000 will remain in place for the 2010/11 self assessment return.
The department recognises that some self assessment taxpayers with balancing payments between £2,000 and £3,000 might wish to take advantage of the increased coding out limit and have it reflected in their 2012/13 tax code.
Agents with clients in this position are asked to contact HMRC through their dedicated telephone number by 30 December 2011 to discuss whether a balancing payment can be coded out in this way.
It will not, however, be possible to code out amounts where a taxpayer has already paid or agreed a repayment plan to settle outstanding tax.
