Have you ever received a tax code that starts with “NT” and wondered what it means? An NT tax code is quite unusual, as it indicates that you are not required to pay any Income Tax on your earnings from a particular job. In this article, we’ll explore why you might receive an NT tax code, such as being a non-UK resident or working in certain industries. Additionally, we’ll discuss the importance of ensuring your tax code is correct and how you can potentially claim a tax refund if you’ve been paying the wrong amount of Income Tax. So, let’s dive into the world of NT tax codes and uncover why you have one.
What is an NT tax code?
An NT tax code is a type of tax code that tells your employer how your earnings should be taxed. It is important to keep track of your tax codes because any changes made by HMRC can affect the amount of income tax you are paying each year. An NT tax code is quite unusual and signifies that you are not paying any income tax on your earnings from a particular job.
Reasons for having an NT tax code
There are several reasons why you might have an NT tax code. These include:
Non-UK resident for tax purposes
If you are a non-UK resident for tax purposes and reside in a country that has a “double taxation” agreement with the UK, you may have an NT tax code. This means that you are not required to pay income tax on your earnings from that specific job.
Reporting income through other means
You may have an NT tax code if you are reporting your income to HMRC through other means, such as self-employment earnings. In this case, your employer will be asked not to deduct tax form your pay in that particular job by the issue of an NT tax code.
Working in film or TV
If you work in the film or TV industry, you may be entitled to an NT tax code. This allows you to be paid for up to 6 days of work without having to pay income tax.
Working while bankrupt
In some cases, if you are working while bankrupt, you may be given an NT tax code temporarily. This allows you to continue working and earning an income while going through the bankruptcy process.
Employees on overseas assignment
Another situation where NT tax codes can be issued by HMRC is when an employee is sent on an assignment outside of the UK and they are no longer a UK tax resident. When an NT code is applied, it means that the employer does not have to operate PAYE (Pay As You Earn) on employment income relating to non-UK work duties. However, it’s important to note that this does not apply to National Insurance contributions, which will have to be reviewed separately.
The application of NT codes is essential to ensure that double taxation is avoided. These codes should take effect from the departure date of the employee to prevent any complications regarding taxation. It is imperative that you complete the relevant forms and send them to HMRC (Her Majesty’s Revenue and Customs) prior to the employee commencing their overseas assignment.
By using NT codes, the employer is relieved from the responsibility of operating PAYE on the employee’s employment income related to non-UK work duties. This provides a simplified tax process for both the employer and the employee, as the complexities of calculating and deducting taxes are eliminated.
Completion of departure form P85
While HMRC has stated that a letter including the necessary information will suffice for NT code applications, it is still advisable to consider completing a departure form P85. This form provides a more detailed record of the employee’s departure from the UK and can serve as additional supporting documentation for the NT code application. Consulting with HMRC or seeking professional advice can help determine if the completion of a P85 form is necessary in a specific situation.
How to change an NT tax code
If you find yourself on the wrong tax code, it is important to get it corrected as soon as possible. In most cases, HMRC will alter your tax code as your circumstances change. However, it is ultimately your responsibility to ensure that your tax code is correct. If you believe your tax code is wrong, you should contact HMRC to provide them with the necessary information to correct it.
Potential tax rebates with the wrong tax code
Having the wrong tax code can result in you paying the incorrect amount of income tax on your earnings. There are several situations that can lead to an incorrect tax code, such as changing jobs without providing the necessary information to your new employer or not utilizing all of your spouse’s tax-free personal allowance.
If you find yourself in a situation where you are paying too much income tax, you may be eligible for a tax rebate. This can happen where HMRC has adjusted your tax code to account for your expenses. Changes in expenses from year to year can lead to an incorrect tax code. In these situations, it is advisable to contact Alexander Ene to discuss potential tax rebates and how they can assist in getting back the money you are owed.
