The Income Tax (Employments) (No. 23) Regulations 1992
These Regulations amend the Income Tax (Employments) Regulations 1973 (“the PAYE Regulations”) so as to introduce, with respect to payments of emoluments made on or after 6th April 1993, a new system of coding designed to enable income tax on benefits in kind to be collected through the PAYE system rather than having to be assessed on the employee at the end of the tax year. Under the system an employee is given a code (a ‘K’ code) which instructs his employer to increase the employee’s taxable pay by a certain amount which reflects the amount by which his benefits in kind exceed his personal allowances. Tax is then deducted under the PAYE system by reference to the resulting total. The system contains an overriding limit on the amount of tax which may be deducted from a payment of emoluments so as to ensure that the tax liability does not exceed 50 per cent. of the employee’s pay. The new system of ‘K’ codes also replaces ‘F’ codes which are currently used where state retirement pensions exceed personal allowances.