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paulsc
Junior Member
289 Posts |
 Posted - 09 April 2009 : 19:13:06
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I have tried understand the NIL TAX RULE but given me a head ache trying ti understand it.
I pay around £45 a month tax on a Post Office pension and belive i may get a IPA
can anyone explain the tax code in laymans terms please
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John
New Member
United Kingdom
73 Posts |
Posted - 09 April 2009 : 21:17:58
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Hi
basically there are 2 types of IPA.
One is based on your disposable income after essential expenditures have been met and the other on the tax you would normally pay on your earnings.
Assuming you know how the DI based IPA works, if you become bankrupt the tax you would normally pay for the remainder of that tax year forms part of your estate and therefore must be paid to the OR.
To do this the OR informs HMRC of your bankruptcy and applies an NT (Nil Tax)tax code by informing your employer, or other provider of your income.
This means that your take home pay will increase as you are paying no tax. You are obliged to set this extra money aside to be collected from you by an appointed agent, generally a company called Moonbeaver.
The tax year runs from April to March the following year. If you were to become bankrupt in April of any given year then the NT/IPA arrangement will last for virtually 12 months to the end of the current tax year. If you were to become bankrupt in March of any given year there is no time to set up an NT/IPA so it won't happen. As the NT/IPA takes time to set up the rule of thumb is if you declare bankruptcy Dec / Jan / Feb / Mar it probably won't happen.
There is one way whereby an NT/IPA can, if started at all, be stopped in the middle of the tax year which is if you change your job.
Hope this helps.
John White
England Jackman & Spacey |
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paulsc
Junior Member
289 Posts |
Posted - 09 April 2009 : 22:33:31
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Thanks john i understand now it has helped alot
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Hallway123
Junior Member
United Kingdom
181 Posts |
Posted - 10 April 2009 : 08:51:42
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| So John does this mean I will not pay tax wether I get an IPA or not I was hoping I wouldn't have to tell my employers, oh dear something new to worry about now. |
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John
New Member
United Kingdom
73 Posts |
Posted - 10 April 2009 : 11:43:27
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Hi
if you do not pay tax then you will not get an NT/IPA. If you do pay tax and you become bankrupt April to December in any tax year then you will.
HMRC will instruct your employer to change your tax code to NT. Bankruptcy is not the sole reason that an NT tax code can be applied so the instruction from HMRC to your employer, in itself, divulges nothing. Although the people in your wages dept may, or may not, speculate as to the reason.
Neither the OR or HMRC will confirm bankruptcy to your employer.
John White
England Jackman & Spacey |
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Topic |
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NIL TAX CODE
