Tax code beginning with K
Comments
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As I said above you add the 3410 to your total taxable income. If your total income is 12,000 then your taxable income is 12,000 minus your personal allowance of 5435 which is 6565. 6565 plus 3410 is 9975 as in 8 above.
Fine but you are forgetting something. The OP asked what difference a K341 code would make on an income of £1000pm. This £1000pm will not include the untaxed income of £8840 that resulted in the K code. So the total taxable income is £20,840. Take off the personal allowance of £5435 and that leaves £15,405 which taxed at 20% is £3081 or £256.75 which is what I said in Post 6.
Mikeyorks has then shown how to do this by adding the £3410 to the taxable income and taking it at 20% which is £3081 - exactly the same.Everybody gets a personal allowance. 9 above is taxing ALL income. The K code works by showing how much has to be added to your taxable income so that you pay the right amount of tax.
Exactly but you have forgotten to add in the untaxed income in your example.0 -
For Example: If you have a total pension income of 16,035 (6035 from the state and 10,000 private)per annum and you are under 65
Your personal allowance is 5435, you therefore pay tax at 20% of 10600 which is 2120.
Or another way as Mikeyorks did is to take the £10,000 private pension and add £600 from the K60 code and you get £10,600 taxed at 20% which is £2120 - exactly what you said.
However in the case of the OP you forgot to add the untaxed income and so gave the wrong calculation.0 -
As I said above you add the 3410 to your total taxable income. If your total income is 12,000 then your taxable income is 12,000 minus your personal allowance of 5435 which is 6565. 6565 plus 3410 is 9975 as in 8 above.
Everybody gets a personal allowance. 9 above is taxing ALL income. The K code works by showing how much has to be added to your taxable income so that you pay the right amount of tax.
So question yourself as to how you derived the wrong answer? You can't add the negative £3410 to the income and then deduct a pa of £5435 ...... as the £5435 has already been neutralised in arriving at the negative £3410!If you want to test the depth of the water .........don't use both feet !0 -
Many thanks for all your explanations.0
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Yes I see that now. Thanks for your determination that I get it right.0
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Ok I have just spoken with HMRC and checked their version. They have confirmed that my annuity will get a BR code, so will be taxed at 20%. My main pension will bear the tax for itself , plus the state pension, plus arrears.
I've done my sums so now I await pay day to see if I'm right.
Just one snag: the annuity has not yet been taxed so I will still owe 3 or 4 months of tax on it. HMRC said they will be doing a mid year review of my tax situation and collect any under or overpayment in my code for 2009-10
- and so it goes on.
I think by that stage as my income will have stabilised ( I have had 4 changes this last tax year ) I will pay off any outstanding bill. Or maybe as I'll be 65 in that year, with a higher personal allowance, they will owe me!
Meanwhile I wonder if Gordon Brown will give us younger pensioners any concessions to mitigate against the loss of the 10% band? If so, I start my calculations all over again! But I won't be complaining.
Many thanks to all who followed this thread and offered help.0
This discussion has been closed.
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