NT (NIL) Tax Code

WickedWitch123

Hi all

Ive just been reading an old mse thread on nil tax code and I just wanted to check if my understanding is correct and also that the information is still up to date.

I plan to go BR in May of this year. I am presuming therefore that a nil tax code will be applied to me from May 2014 to March 2015. What this means (I think) is that I will receive my GROSS pay each month (rather than NET) and the OR will take this into account when looking at my income/expenditure.

I kinda get a bit lost at this stage so my questions are:

1. Lets say I usually pay £350 in tax, does this then become my IPA (presuming I have no other excess income).

2. If yes, then does this IPA only last from May 2014 to March 2015?

I'll leave it at that for now because i'm tying myself up in knots lol.

Thanks
WW

woodformoretrees

Yes, the NT IPA is related only to the amount of tax that is normally taken in PAYE but will come straight to you for the 1 year of bankruptcy. It runs to April though, not March.

It doesn't mean that you have a standard 3 year IPA, that's a separate thing.

An NT IPA will last for the financial year only (or if you change employment during that year I am lead to believe it ceases then and you go back to your normal PAYE arrangements)

WickedWitch123

Ah thank you that's what I thought. So you could end up in a situation where in effect you have 2 IPA's, one running for the remainder of the tax year and one for 3 years.

From previous posts it looks like you can sometimes end up in a situation where the tax money isn't taken for a few months (whilst things are set up I guess) so you end up with this surplus cash, which of course isn't yours and needs to be paid over at some point.

People have posted in the past saying that they've timed their BR so it doesn't full early in the tax year to avoid this NT issue but as far as I can tell there are no other implications apart from it being a faff???

Thanks again.

antonic

The Tax year runs from 6th April to the following 5th April.

If you plan to go BR in May, then its possible then the NIL tax code wont come into effect till June (if your monthly paid). It will then run till the 5th April.

If your desperate to put on a NIL code as quickly as possible, you could try to go bankrupt as early as possible in May.

woodformoretrees

WickedWitch123 wrote: »

Ah thank you that's what I thought. So you could end up in a situation where in effect you have 2 IPA's, one running for the remainder of the tax year and one for 3 years.

From previous posts it looks like you can sometimes end up in a situation where the tax money isn't taken for a few months (whilst things are set up I guess) so you end up with this surplus cash, which of course isn't yours and needs to be paid over at some point.

People have posted in the past saying that they've timed their BR so it doesn't full early in the tax year to avoid this NT issue but as far as I can tell there are no other implications apart from it being a faff???

Thanks again.

Yep, definitely make sure that you put the money away each month. It could well be months before they chase for it, but they will

I also am unaware of any other implications of bankruptcy date, aside from the faff.

WickedWitch123

antonic wrote: »

The Tax year runs from 6th April to the following 5th April.

If you plan to go BR in May, then its possible then the NIL tax code wont come into effect till June (if your monthly paid). It will then run till the 5th April.

If your desperate to put on a NIL code as quickly as possible, you could try to go bankrupt as early as possible in May.

Ah right, thank you. I'm not sure if i'll have the pennies ready for early May but we'll see.

Thanks.