Personal Allowance has increased but so has amount of tax paid?

slightlyconfused_3

Hi there,

I wondered if anyone could give me any advice prior to me calling the tax office to query the tax I have been paying this financial year.

This month I have received the lowest nett pay this year to date despite having the highest personal allowance of the year to date!

Details of my pay are:

Sept 08:
Tax Code: 264T / 0
Tax Paid: £709.60
NI Paid: £309.65
Gross Salary: £3267.75
Net Salary: £2248.80

Aug 08:
Tax Code: 204L / 1
Tax Paid: £718.80
NI Paid: £318.54
Gross Salary: £3467.75
Net Salary: £2430.41

Jul 08:
Tax Code: 257L / 0
Tax Paid: £621.20
NI Paid: £309.65
Gross Salary: £3267.75
Net Salary: £2336.90

Jun 08:
Tax Code: 257L / 0
Tax Paid: £621.20
NI Paid: £309.65
Gross Salary: £3267.75
Net Salary: £2336.90

May 08:
Tax Code: 257L / 0
Tax Paid: £597.87
NI Paid: £309.65
Gross Salary: £3267.75
Net Salary: £2360.23

Does anyone have any ideas?!

The only 2 months that seem consistent are June and July. Any advice woulld be much appreciated.

Many thanks.

ceeforcat

Two things:

1) you are a higher rate taxpayer and consequently will not benefit from £120 tax saving that basic rate taxpayers will receive as a result of the increase in personal allowances.

2) For some reason your code has not altered significantly from July to September - increasing by 7 points (increase in personal allowances of 70) whereas most will have codes increased by 60 ( increase in personal allowances of 600). Clearly this is as a result of the adjustment made in your code in August where your code was reduced by 53 points.

This is why your tax has altered and you should be asking HMRC why your code has reduced. Your net should remain constant for the remainder of the tax year.

slightlyconfused_3

ceeforcat wrote: »

Two things:

1) you are a higher rate taxpayer and consequently will not benefit from £120 tax saving that basic rate taxpayers will receive as a result of the increase in personal allowances.

Thanks ceeforcat. i will definitely be calling them today.

I know I wouldn't be any better off with the change made in September but I also believed I wouldn't be any worse off

CLAPTON

you weren't worse off with the change made in september
you were worse off because of the change made in august but you didn't notice because you have more gross income
presumably you have significant benefits in kind... maybe they updated that figure in August... do you know what your tax code ought to be? look at your P11D

slightlyconfused_3

My only benefits are a company car. However the value of this reduced compared to last year as it is a car of lower value. I have the P11D at home so will check tonight.

MarkyMarkD

But August (when the reduction in tax code took effect) was on a month 1 basis, whereas in September you have reverted to a cumulative basis*.

Because your tax code should have gone up by 60, and has in fact only gone up by 7 between July and September, you would definitely be paying more tax in September.

As others say, the interesting question is why the code changed in both August and September - in both cases, you should have had a notice of coding explaining the breakdown of the new tax code.

* In case it isn't obvious to you, if your tax code goes down they normally switch you to a non-cumulative (month 1) tax basis so that you don't get hammered for a lot of extra tax in one month. This will mean that you pay the right amount of tax in each subsequent month, but you will never catch up the shortfall for previous months, which will eventually be carried forward to the next tax year (or you could pay it under self-assessment if you wanted to). If your tax code increases then they just do it cumulatively and you get a one-off benefit.

The situation with the thresholds changing during the year has screwed up this logic - even though your code has increased from 257 to 264, you are paying more tax because of the change in the thresholds. They should, arguably, have made you "month 1" to avoid nobbling your September pay.

dori2o

MarkyMarkD wrote: »

The situation with the thresholds changing during the year has screwed up this logic - even though your code has increased from 257 to 264, you are paying more tax because of the change in the thresholds. They should, arguably, have made you "month 1" to avoid nobbling your September pay.

Can't believe how many people this has happened to, I've been explaining this to people for the last 2 weeks at work.

Unfortunately they have brought this change to the allowances in at a time where they are in the middle of processing P11d's, which when input on the system automatically cause a coding to be issued if the benefit details have changed. So as correctly advised above, anyone whose code has not increased by 60 compared to the code used in July/August and is a 40% taxpayer, will unfortunately have extra tax to pay this month.

The codes should have been issued on a week 1 basis, but the COP system (the system codes are issued from) has not recognised the fact that the change in rate bands will cause underpayments, and so assuming the codes issued are higher than the codes that have been operated for the majority of the year so far, it will automatically issue the codes on a cumulative basis. There was no human intervention with each individual code, it was an automatic process, as it is with the P11d capture details and subsequent code issues following this process.

The annoying thing is, if we advisers issue a code that is even slightly wrong, even if there is no material impact on the taxpayer, we are lambasted for it. However, they have a system in place that allows codes to be issued, that do cause financial impacts to people, and they just do not care. I have made several complaintsabout this system, only to be told effectively to shut up, and that I may be put on review for being "negative" in my work.

HMRC, is an !!! to work for and as soon as I can find something else I'll be out of there. The job is no longer about satisfying the "customers" (as if people have a choice but to deal with us), it's about STATS. They may well be able to tell the bigwigs in Parliament that they have dealt with 40 Million calls, but what they dont tell them is that 35million of those calls were people ringing back cause we didn't do what we were asked/ what we promised to do the first time.

Working for HMRC, you are encouraged to get the call done with as soon as possible, and given no time to complete further call related tasks, and should you dare to do so, your told off for not being available to take calls. The whole thing is a complete shambles. I simply refuse to obay this order, and have constantly been cautioned for the past few weeks about this. But, I like toknow that I have done the job I was asked to do by the customer.

The sooner we get back to providing a service, instead of providing STATS for these grossly overpaid senior officers to claim their bonuses for their supposed target hitting achievements the better.

MarkyMarkD

To be fair to HMRC, the tax coding system was not designed for idiot governments making changes to income tax thresholds half-way through a tax year. It's only due to the timing of Gordon's/Eyebrows' fudge that this mess has arisen.