DMBM618060 - Pre-enforcement: coding out: NPS coding run

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In January each year, the Annual Coding run will take place.

NPS(PAYE) will review every PAYE record except where the Deceased indicator is set and will determine a tax code for all individuals with a PAYE employment.

Coded out debts will be included in this review from 2012-13 onwards.

NPS(PAYE) will start the Annual Coding main review in early January each year.

The restriction included in the tax code which will collect the debts will be calculated separately to the restriction to collect PAYE underpayments.

NPS(PAYE) will prioritise debts to be coded out in the following order:

  • PAYE potential underpayments
  • PAYE underpayments
  • SA balancing payments
  • debts transferred from IDMS; NPS will prioritise debts from IDMS in the following order:
  • earliest date sent
  • largest debt
  • class 2 NIC debts
  • SA debt has preference over tax credit debt if both are sent on the same day for same amount.

The P2 Annual Coding Notice will be issued to the customer showing a separate entry for any debt to be coded out. This will be described as ‘Outstanding Debt’ and there will be an explanation of the calculation.

January 2014 will be the first year that a class 2 NIC debt will be included in the coding run.

From 4th March 2020, HMRC will change the process for recovering outstanding SA debt through the coding-out system. HMRC will have the ability to collect outstanding debt by changing the tax code in the current year.

If we recover the outstanding debt through their tax code in the current year, there will be an immediate reduction in their pay.

Any outstanding debt that cannot be recovered in current year may be collected in current year plus one.

A P2 coding notice will be issued for debts coded out in-year. If the debt continues to be coded out in current year plus one, the annual P2 coding notice will show this.