Anyone know about Tax Codes and who is responsible?

lufcgirl

I started my first job for the tax year 17th August, and for the first two weeks was emergency taxed. As I didn't recieve the overpayment back automatically I called the Inland Revenue, and I was surprised to find I shouldn't be paying any tax at all due to not hitting the level of pay for the year.

So three weeks ago they changed my tax code from 647L to 525L and sent it to the agency I work for. The tax code hasn't been amended and the agency say they have never recieved notification (I got one in the post) and now the tax office have sent it over again to them.

Does anyone have any idea on how long this will take to sort out, if this is indeed the right tax code and who I need to pursue it with if it still isn't sorted in the next few weeks?

LittleVoice

The repayment of the tax deducted should happen with your first pay calculated after they get the correct tax code.

Did you complete a P46 when you joined? Did you have a P45 from the current year (though you didn't have employment, were you claiming JSA during the current year?)

lufcgirl

I was claiming JSA and handed in my P45 from that the third day after I started. From then the BR tax code was amended to 647L which the agency assured me is correct. However I do have in my posession a letter with the tax code 525L which is from three weeks ago and still not being used.

LittleVoice

So does that mean the JobCentre/DWP gave you a P45 which had 647L as your tax code? If so, why does the tax office think it should be 525L?

lufcgirl

I don't have a clue what the P45 said, but it was from the JobCentre and after it was processed my tax code was changed to 647L which *I think* is the standard for any working person in the country.

The Inland Revenue changed it to 525L as they said it was their way to get me a rebate and make sure I don't pay any tax as at the moment I haven't reached the threshold for the year. If that makes sense at all!

It's the agency who keep saying they haven't received it.

LittleVoice

lufcgirl wrote: »

I don't have a clue what the P45 said, but it was from the JobCentre and after it was processed my tax code was changed to 647L which *I think* is the standard for any working person in the country.

The Inland Revenue changed it to 525L as they said it was their way to get me a rebate and make sure I don't pay any tax as at the moment I haven't reached the threshold for the year. If that makes sense at all!

It's the agency who keep saying they haven't received it.

There should have been a copy of the P45 which would have been for you to keep and not handover. It should show the tax code to be applied.

647L is indeed the most common tax code. However if it was applied on a cumulative basis rather than a Week 1/Month 1 basis, you would have been taxed correctly as soon as it was used.

Using 525L might make sense if you under-paid tax the previous year or the company can't go back to applying 647L cumulatively as from the start of your employment.

trevormax

First things first, the 525L tax code is lower than the standard 647L tax code meaning you will be taxed MORE on your earnings if this is applied. For the HMRC agent to say they are reducing your tax code to ensure you dont pay tax is ridiculas. What he should have done is re-issued the 647L cumulative tax code to your employer. Also, with PAYE, your personal allowance is spread throughout the tax year so when you get paid in May for example, even though you have not earned £6,475 yet, you can still be taxed.

The agency is correct in saying that 647L is the standard and correct tax code for them to use and the lack of an W1/M1 at the end of the tax code suggests this is not an emergency tax code but a cumulative one. There is no reason (that I can think of) for HMRC to issue a lower tax code to the agency to get them to apply a cumulative tax code unless you have started to receive employment benefits like a company car, or you did not pay enough tax in a previous year.

On the coding notice you have recieved from HMRC,there should be a breakdown of the code they have issued with reasons for any reduction to the standard code. Does your coding notice have any of this? What does it say?

It may take your employer a little while to repay the overpaid tax or they may have already done so as it is easy to miss the little minus sign in front of the tax paid on your payslip. If you have a payslip, you can post or PM your gross wages to-date, tax deducted and net wages and I or someone else can tell you if it is correct or not.

lufcgirl

Ok....from the letter about the tax code 525L

Your new tax code for the year 6 April 2009 to 5 April 2010 is 525L, which replaces 647L

Here is how we worked it out:

Your personal allowance £6475
Jobseekers allowance £1219
a tax free amount of £5256


And my pay details (as you'll see from this, you'll see how £200-odd will make a difference for me!)

Gross to Date £1915.05
Taxable to Date £1915.05

Tax to Date £232.20

EE's N.I To Date £104.55




As I said before, all I was trying to get back was the emergency tax I paid which was about £50 over the first two weeks! I've got all my payslips with me and not one has a rebate on at all.

trevormax

OK, so it looks like HMRC have deducted the JSA you have had since the start of the tax year from your tax code rather than put it as previous income. I've not seen this done before but the amount of tax you pay is the same for both senarios.

Looking at your code it seems to be a cumulative code which means if your employer opperates it correctly, you should get the overpaid tax back automatically on the first wage they use the code. This hasn't happened in this case soI would say they have not opperated the cumulative tax code correctly and you need to contact HMRC to ask them to issue another coding notice to your employer informing them to put you on the correct cumulative tax code.

You should deffinately not be paying tax yet as you have enough un-used personal allowance to cover the amount you have been paid thus far.

If the payslip details you have posted are for last week, it covers 8 weeks of wages. Based on this I calculate your gross weekly wage to be roughly £240 (£1,915 / 8). If this is correct, by my calculations you should start to pay tax at around mid November if you are paid weekly or end of November if monthly as this is the point your wages catch up to the unused personal allowance.

If the wage slip is up to the end of this week, I calculate you get £212/week (£1,915 / 9) and you should start paying tax at the end of November.

Whatever the case is, you will be paying tax by the end of the tax year with these wages.