What do these tax codes mean ?

ipri

Hi....just retired...original pension was..647L M1...for last 4 months...now it has changed to...645L....not complaining since I'm paying £100 less tax....will it change again.?? thanks ian

McKneff

The different tax codes dont equate to you paying 100 less tax, where are you getting your figures from.

6470 minus (that you were allowed to earn)
6450 that you are allowed to earn)

equal £20 less allowance so that you pay more tax on the £20 ie 20% = £4 more tax.

Maybe its because i dont know what the ML means.

I am presuming you are under 65

CLAPTON

'normal' people are entitled to a tax free allowance of 6475 per annum (i.e you can earn 6475 in a tax year before paying any tax)
the tax code for this is 647L

647L M1 is similar bui not quite the same as it gives you a tax free allowance of 6475/12 per month : this is an emergency tax code often applied if a P45 isn't available :
if you earned that same each month for a year the 647L M1 would give the same result as 647L
but if you earned very little some months are more for other you may overpay tax

if you have reached the state retirement age then you may be entitled to a higher tax code depending upon your income

CLAPTON

McKneff wrote: »

The different tax codes dont equate to you paying 100 less tax, where are you getting your figures from.

6470 minus (that you were allowed to earn)
6450 that you are allowed to earn)

equal £20 less allowance so that you pay more tax on the £20 ie 20% = £4 more tax.

Maybe its because i dont know what the ML means.

I am presuming you are under 65

not ML but M1 which reads 'M one' or 'month 1' : you get a non cumulative tax code of 6475/12 per month

dtaylor84

ipri wrote: »

Hi....just retired...original pension was..647L M1...for last 4 months...now it has changed to...645L....not complaining since I'm paying £100 less tax....will it change again.?? thanks ian

You will pay £4/month more tax. The first month you changed from a M1 code to a cumulative code you will have paid less tax as you benefit from any previously unused allowance from earlier months.

McKneff

dtaylor84 wrote: »

You will pay £4/month more tax. The first month you changed from a M1 code to a cumulative code you will have paid less tax as you benefit from any previously unused allowance from earlier months.

blummin' 'eck, i was right with my £4 a month then. Doesnt often happen with me, thanks DT.

CLAPTON

dtaylor84 wrote: »

You will pay £4/month more tax. The first month you changed from a M1 code to a cumulative code you will have paid less tax as you benefit from any previously unused allowance from earlier months.

a change of code by 20 equates to a tax change of 20x 20% = £4 per YEAR and not per month

in this case we don't know what the OP's income was from the beginning of the tax year so its impossible to work out what his tax will be once he is on a cumumulative tax code.
If his tax changed by £100 when it's likely he didn't start his pension on 1st april 2010

jem16

CLAPTON wrote: »

If his tax changed by £100 when it's likely he didn't start his pension on 1st april 2010

from previous posts his first pension pay came around the beginning of June. Previous to that he was a higher rate taxpayer so probably overpaid tax for April, possibly May.

CLAPTON

jem16 wrote: »

from previous posts his first pension pay came around the beginning of June. Previous to that he was a higher rate taxpayer so probably overpaid tax for April, possibly May.

Thanks
nothing like some actual facts to make some sense

jem16

CLAPTON wrote: »

Thanks
nothing like some actual facts to make some sense

It does help - if only people would post all of the facts it would help give a better answer rather than a guess.

It seems he retired about 11th May but didn't receive first pension till around beginning of June. He was a higher rate taxpayer whilst working but his pension is still in higher rate tax, just.

Perhaps ipri could fill us in a little more too.

ipri

Thanks very much to everybody for replies........I retired May 9th on my 60th birthday...1st pension cheque June 9th....recieved statement with this.....last week revised statement and tax reduced by £100...I have no complaints about this but will feel happier when / if things eventually settle down. thanks again ian