Dynamic tax coding
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marco_79
Posts: 237 Forumite
in Cutting tax
I’m in the very fortunate position that I earn a very high salary of over £123k. In years gone past I have always paid a tax bill to account for the loss of my personal allowance when filling out my self cert.
However now with the introduction of dynamic tax coding I don’t have a clue about how much tax I will pay each month or the likely bill at the end of the year. I only know what my pay slip says each month.
My tax code has now been put at 21T. Can someone in the know explain how this works. With this code what can they take off each month?
Can I tell HMRC to just put it back to 1150 and I’ll pay the tax bill like I always have?
However now with the introduction of dynamic tax coding I don’t have a clue about how much tax I will pay each month or the likely bill at the end of the year. I only know what my pay slip says each month.
My tax code has now been put at 21T. Can someone in the know explain how this works. With this code what can they take off each month?
Can I tell HMRC to just put it back to 1150 and I’ll pay the tax bill like I always have?
Smile and be happy, things can usually get worse!
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Comments
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T means HMRC have not yet decided on a final value and will keep reviewing your digits bit of the code
21 means you get an allowance of £210 per year - that for sure is wrong given your >122k salary as it means you will underpay tax by quite a bit0 -
Have to disagree with the comment that 21T is wrong.
The op has not told us how the code is calculated so we don't know what Personal Allowance, if any, is included.
Could simply be PA £0 + £210 Professional Subscriptions/job related expenses/mileage expenses/gift aid/pension relief etc etc.
But to answer the op's question, no you can't go back to 1150L and pay later. PAYE tries to collect the right tax as you go along.0 -
The £210 is professional subs. Therefore nil PA other than that. Thanks for answering the question about paying later.
Other point was that as dynamic coding didn’t start till July I’m now paying for the back log too. Can they recoup more than zeroing the PA. My understanding is I’m now paying full tax from the first £1 but not sure how the calculation works.
Last year was a £4K tax bill and job done, this is so much more complicated.Smile and be happy, things can usually get worse!0 -
Yes, you can have a negative tax code (which has SK or K at the start rather than a letter at the end) which means your employer would add an amount (for calculation purposes only) to your taxable salary before calculating the tax due.
The maximum employers can ever deduct is 50% of your pay.0 -
Thinking about it I'm not sure you are paying the "back log" from April to when your code changed in July.
If you were you would have additional entries in your tax code and it would be lower than 21T.
If your professional subscriptions are £210 it suggests your code consists of just the subscriptions and no other element.
Don't forget this won't alter things for 2016:17 so you can expect the normal bill to pay this coming January but by January 2019 you sound like you will much less to pay direct.0 -
that was my point. On a salary of 123k (+? OP does say over) he would have zero personal allowance so even with 210 subs I would have expected to see a k codeDazed_and_confused wrote: »Thinking about it I'm not sure you are paying the "back log" from April to when your code changed in July.
If you were you would have additional entries in your tax code and it would be lower than 21T.0 -
OP suggests in their first post that they complete self assessment.(which should be the case with an income over £100k)
Where this is the case Dynamic Coding usually does not apply.
Whilst the PAYE system will calculate what it believes has been underpaid when the code is reviewed it wont include it in the code as an in year adjustment, as it knows a tax return is due to be submitted for the year.
Even if the system did include an In Year Adjustment the taxpayer has the right to ask for this to be collected in the following tax year and have it removed from the code.
They can do this on the phone, or by logging into the personal tax account and requesting the IYA be removed from the code and collected later.
This seems to be the case here.
OP has an income in excess of £123k so has 0 personal allowance but has expenses/professional fees of £210, therefore a code of 21T.
OP:
Where HMRC have an estimate of your income in excess of £100k they cannot just give you the standard tax code of 1150L as you are not entitled to all the personal allowance. The way they have operated the code is correct.
Whist you are required to submit a tax return which has a due date, and payment date of 31 January, tax should be paid on your PAYE earnings in the year it is due. Not almost 9 months later.[SIZE=-1]To equate judgement and wisdom with occupation is at best . . . insulting.
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