Income tax & tax code after bankruptcy

FeelingLighterAlready

Just a quick query - sorry I have posted a few threads over the last couple of days, I just have so many questions and this site is so helpful, I feel completely at ease in asking them as theres never a long wait for a helpful reply;) .

After I am made bankrupt, I understand by tax code will change & I will have to save the tax myself to be paid back at a later date? Can anyone clarify when or if this is true? Its not readily available on the CCCS website or maybe I am just going blind :rotfl:

skylight

Technically, when you go BR, the OR organises with the Tax office a nil tax code so you do not pay any tax between now and the next tax year. This money is collected from you (also known as an IPA, but its a tax IPA...) via a third party company. Now, this will only be collected if
A) - The OR and HMRC actually do it. Sometimes it just doesn't happen and some people fall through.
Your tax is more than £50 a month, they don't bother to collect less than this as it costs them more in admin.
C) You don't spend it. Cos then you will owe it to them and they will get really cross and send you naughty boy letters.....

So if your tax code were to change this month, but the third party company (Called Moon Beaver........... stop laughing....) didn't start to collect until Jan 09, you would have to save the money and hand it over when they asked.

FeelingLighterAlready

ok thanks skylight. So just to clarify when my tax code changes I will have to save what I would normally pay in tax? It'll be the same figure? I dont get it though, why dont they just leave my tax code as it is if that is the case? Sorry i am probably being a real dummie but just need to get my head around it as wanna do everything by the book & not have a mahoosive bill to pay at the end of the tax year!

At the start of the next tax year will my tax code change or will it stay as that for the duration of my bankruptcy til I'm discharged? Also will these third companies or the tax office, collect the money through my wages or will I have to arrange payment to them?
Thanks so much again :beer:

skylight

You save your tax so it goes to the OR and not the taxman instead. It will eventually be that a standing order or direct debit is set up so you pay this money straight away and not have to save it, but in the meantime you will have to put it by and not touch it.

You have have a nil tax code for the remainder of this tax year only.

As said, it may actually not happen - some people slip through the net and there is even a chance they may decide that its only for 4 months anyway (cos if you are going BR then this month wont count), its not worth the hassle of setting one up as that in itself takes time.

You should ONLY put the money by if you have been given a nil tax code - either the taxman has it or the OR but not both.

Rylynn

I have not been given a nil tax code, my hours dropped (due to health) from time of BR to OR interview one week later, he said you pay £119 tax I said NO I did it is now £60 a month he said it is not worth bothering to set it up for a nil tax code, however I believe that at the end of March they can then just ask the HMRC (sorry is that right!) for the money direct with no third party like Moon Beaver, who would take a cut which would make it pretty worthless.

As has been said, you will get the money in your wages but YOU have to put it by til you are contacted, when they set up the DD they will take what is owed out first then just the normally monthly sum each month after that.

I know someone here went BR on March 31 to stop it happening.

You will be back to your normal tax code from next April if it is set to Nil for the next 4 months, and pay tax as you were doing before BR. Your employer is not told why the Nil tax code is being asked for, and there are other reasons apart from BR to be given a nil tax code. I do not think your employer can ask you either why it has happened, due to data protection laws.

Rylynn