K tax code

claire07

I seem to have had endless problems since I retired with my company pension and tax. Now this month I have been given a tax code K365 and my net company pension has been halved. Is this likely to be due to the tax office sending out the wrong codes that I have been reading about? HMRC have not yet sent me a tax code for 2009/10 and my code for April's payment was 647L.

scoobs02

What s your income? Are you receiving State Pension? It does seem a low tax code, but if you are receiving a high amount of State Pension it could be correct.

claire07

I'm receiving state pension plus less than 5k a year company pension. I'm just stunned how the net amount has changed so much in a month when I haven't received an updated tax coding.

jem16

claire07 wrote: »

I'm receiving state pension plus less than 5k a year company pension. I'm just stunned how the net amount has changed so much in a month when I haven't received an updated tax coding.

You won't be entitled to a 647L code as you are receiving a state pension. This is paid to you gross but is taxable.

Your company pension has no bearing on your tax code. What we need to know is your age ( i.e over or under 65) and how much the state pension is. It may also be possible that you are paying back tax that is owed from last year.

How long has your state pension been paid?

claire07

I'm 62 and receiving basic state pension butI phoned the tax office and it looks as though my company (which is now in administration) has been using the wrong tax code 647L on my pension so now the tax office are taking back the tax they should have been deducting. Just wish I'd been given some warning.

jem16

claire07 wrote: »

Just wish I'd been given some warning.

You should have been sent a coding notice but there seems to be a lot of problems at the moment with HMRC.

Be_Happy

I have just started taking my deferred State Pension and have been through this with the Tax Office. I've been given a Code of K30. The guy I spoke to seemed very clued up on the whole business, told me I was going into negative tax and explained it to me as follows:

I get a state pension and 3 private pensions. The two smaller private pensions will be taxed at Basic Rate of 20%. The largest private pension (equal to approx. half of my state pension) will take the state pension into account and be taxed at K30 (on a month 1 basis) which means that they will take the gross monthly amount of the private pension and add a 'notional amount' of £25 ie £300 annually divided by 12. This total will then be taxed at 20%.

It all sounds very complicated, but when I calculate my total annual income, take a personal allowance of £6475 and tax the rest at 20% the tax payable would be almost the same as I'll actually be paying, so it seems correct.

I'll get the written confirmation in a week or two, so hope it all goes smoothly.

novice-saver

A "K" code is used when you owe back tax which is a greater ammount than your basic allowance.

Here's the explanation snipped from HMRC:

How the 'K code' works

If your deductions (untaxed income on which tax is still due) are more than your allowances you'll be given a K code, to ensure you pay tax on the excess. Whereas with other tax codes the number indicates the amount of income you can have tax-free, the number in a K code multiplied by ten broadly indicates how much must be added to your taxable income to take account of the excess untaxed income you received.
K code example


K497 means:

• your untaxed income was approximately £4,970 greater than your taxable income
• as a result, approximately £4,970 must be added to your total taxable income to ensure the right amount of tax is collected
  (The actual calculation is more complex and of course precise - and ensures that the exactly right amount is added to your taxable income.)

anniemo60

I too have had problems understanding my tax code [codes?] since I retired.
I retired due to ill health July 2006. When working, My code was 489L 2005/6. But changed in April 2006 to 503L
I then retired July 2006.

I have a state pension and NHS pension + a small private pension.

My tax codes have changed regularly since then.

ie. 7th march 2007 tax code BR
15th March 2007 / 2008, code K177
April 2008/9 K302
April 2009/10 K126
April 2010/2011 K 138

My small private pension [ £150.72 this year] is still using the BR code though. So this means I have 2 codes. Is this right or should I only have one?

My total income is now £15.776.00. My personal allowance is £6475 and I am now 62 years old.

I have tried so hard to work this out including ringing the tax office in previous years, but am still very confused.

Should I go to a tax accountant to ask them to do it? If so would this cost a lot to do?

I would be very grateful for any help please. Anniemo

novice-saver

From the figures you've shown it looks to me (not a tax expert) as if you are being over taxed.

As mentioned above, the "K" code is used by the tax man to claim back tax owed from previous years when the ammount cannot be met by reducing your personal allowance to zero.

Was a lump sum in excess of £30,000 paid on redundancy/retirement paid?
(not to be confused with a pension commencement lump sum).

From personal experience, the tax people are genuinely helpful - provided you treat them like human beings, and tell them the whole truth.

Two tax codes for two income streams is normal.
In an ideal world one (probably state pension in your case) would include your personal allowance, and if that income is sufficient to pay tax the other income would be taxed at BR so it is all taxed at 20%

molerat

Either your state pension is £7865 pa or you have underpayments from previous years (or HMRC have screwed up). Your coding notice should give you the details.