New Rax Code - Completely Confused

moneyfoolish

Obviously title should be New Tax Code!!!!
2 sources of income for 2010/2011 - Gross Salary of £40,633 with Pension Contributions of £2,763 and Gross Pension from previous employment of £19,341. Code on my salary for 2010/2011 is 647L / N. Got PAYE Coding Notice on 6 January 2010 from HMRC Customer Operations at SALFORD telling me that Pension for 2010/2011 was to be taxed at D0 (which I believe is 40%?). Not sure if my salary takes me into the 40% bracket or not but if it does the coding would seem to be correct. If it doesn't I suppose I will have paid a bit too much tax? However, I received another PAYE notice on 30 January 2011 from HMRC Customer Operations at EAST KILBRIDEtelling me that my Pension for 2010/2011 will be taxed at BR (which I believe is Basic Rate) but my salary will be taxed at K242! They seem to have started with my personal allowance of £6475 and then made an adjustment to the basic rate band of -£8909 showing tax is due on
-2434 which is presumably from where they get the K242. I don't have a clue what they're trying to do. What makes it worse is that they go on to say that my employer will have used the wrong code since the start of the tax year and I will end the year with an underpayment of £3007!!!! I'm only guessing but I suspect the 2nd office doesn't realised my pension is being raxed at 40% because I can't for the life of me see how I can be underpaying tax if my pension has been taxed at 40% for the whole year? I telephoned the office at East Kilbride but the lady I spoke to didn't have a clue what I was asking even after disappearing twice to talk to other people! She ended up saying she would talk to other people in the office and call me back. I never received a call! Any of the experts out there know what is going on?

harryhound

Good luck - you are dealing with East Kilbride.

Here is a thread dating back 18 months, before the details of the chaos at HMRC emerged into the national media.

The first thing you need to establish is, just who you are talking to and where. All over the country clerks now have access to your file on the new computer system - unfortunately, as a judge dismissing evidence in a fraud trial, observed: access to data does not mean that the clerk has "cognition" of the information.

I have been chasing an East Kilbride file round the country for a year now and I have spoken to or been written to by four different offices.
On several occasions I have been given what could politely be called "miss-information", compounded by clerical mistakes.

I "think" I might at last have got everything sorted out, but it would not surprise me if the system tried to fine me 100 GBP again because my 31st January tax payment has been posted to a suspense account.

You need to get together all your information and in effect do your own self assessment before talking to anyone. I would write confirming every conversation (your letter won't be read for months but at least you will have a record of what happened and when).

https://forums.moneysavingexpert.com/discussion/2137649

Harry,

PS You won't believe this, but one of the offices that has written to me on behalf of East Kilbride has been Cardiff.

Elaine_Wilson

I can see what they are trying to do but I cannot understand how they have got to their figures.

First, you are due to pay some higher rate tax. The basic rate band is £37,400 and the personal allowance (which I think of as a 0% band) is £6,475 so you pay 40% on income above £43,875.

Your income is £40,633 plus £19,341 minus (possibly) £2,763 which totals £57,211.

This means you need to pay higher rate on £13,336.

You pension has been put onto a D0 coding which as you say collects tax on the whole amount at 40%. This is too much so they have tried to rectify the situation.

First they reduced the tax on the pension to 20%. Then the reasoning is like this.

Applying a normal tax code to the salary will give a basic rate tax band of £37,400. But we have used £19,341 of this against the pension. So the PAYE system will not allow the basic rate band to be reduced so an adjustment is given to the personal allowance to have the same effect.

Taxing you on an extra £8,909 should give the right answer. But I can't see it does.

Perhaps you have other (investment) income which clouds the issue?

But realistically I doubt if you will be able to do much about this. To get the code numbers adjusted and sent out before the payments are calculated for March is a tad optimistic.

Your final position will depend on whether the code is on a month 1 basis or not. I'd suggest you review the position over the whole year as soon as you get your March payments. An underpayment of £3,007 seems ridiculous unless I am misunderstanding something.

MRSTITTLEMOUSE

A friend of ours has just had this too,we've been trying to sort it out for him.
He has a pension and his salary,his pension has been taxed all year at the basic rate amount (that works out accurate) and he has had a tax code adjustment of £4080 put on his tax code.
He only works part time and his salary and pension only come to £34,560.00 per year and he owes no tax or anything for previous years.
We can't understand it either.

moneyfoolish

Elaine. What I can't understand is, as these codes are for the 2010/2011 Tax Year ,why they are doing this now when it's almost the end of the year. Why can't they just leave it until the tax year finished. I know I will have paid too much tax but what I don't want is to be owing large amounts of money!!!!