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anyone help?
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WaxiesDargle wrote: »although I'm still not sure what the £564 figure is
It will be the amount of too little tax paid when your pension company were still using your 499L tax code even though your income had increased. To begin with you were only due to pay 40% tax on £2480 of your income. Now that has jumped up to £10,478 you were getting the benefit of 20% tax on that difference when it should have been 40%.0 -
thanks jem
but i only got my pay rise on august 6th and i've yet to receive my other one...the 499L was to take into account the time when i first went into 40% so not sure where i have not paid enough tax to the tune of 564 quid
oh well i've taken up enough of your time....i'm sure it will be ironed out at the end of the year as they said0 -
WaxiesDargle wrote: »thanks jem
but i only got my pay rise on august 6th and i've yet to receive my other one...the 499L was to take into account the time when i first went into 40% so not sure where i have not paid enough tax to the tune of 564 quid
It's just the way cumulative tax codes work. They work out the tax over a whole year. Out of interest are they applying the newt tax code on a Month 1 basis as opposed to cumulative basis? This would avoid a large part of your pension disappearing when the new code is first used but may result in the underpayment.oh well i've taken up enough of your time....i'm sure it will be ironed out at the end of the year as they said
When you get your P60s calculate it then and apply for a rebate.0 -
I'm not sure if they are doing it on a month 1 basis jem (to be honest I'm not sure what this means)
I'm almost sorry i had the payrises! (joking)0 -
WaxiesDargle wrote: »I'm not sure if they are doing it on a month 1 basis jem (to be honest I'm not sure what this means)
Tax is normally done cumulatively with each month reworking your tax amount depending on what has gone on in the months before. The problem with such a big change from a 499L code to a K120 code si that the first time it is used you would see a lot of tax being taken off in one fell swoop as it works out you should have paid more tax than you did the previous months. Sometimes when this happens HMRC tell your employer to use the code on a Month 1 basis so that it will look only at that month and take the appropriate tax. It will not look at what went on before. Doing this of course means an uderpayment at the end of the year. Next year that underpayment can be spread over 12 months so you would not notice it as much.
It would usually say on the Coding Notice if this is what is to happen but your payslip will also show it as K120 M1.0 -
A "K" code should not tax you at more than 50% I believe?0
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thank you for taking the time to answer my questions, its very much appreciated0
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£1685.58 on salary and £1715.52 on pension. Total £3401.10.
You can easily work it out yourself using this site.
http://listentotaxman.com/index.php
the eventual pay was...
£1685 salary (like you said jem) and £1612 pension as they gave me a K120 M1 tax code
ps..I got an increase in my pension of £3163 a year...£263 a month out of that £263 I got £108 net into my bank...thats a deduction of almost 60% tax0 -
Hi again!
I'm keeping this latest info on this thread if that's ok
I received a tax calculation letter sent out on 17 November saying that I had underpaid tax by £656. As you may gather from this thread for most of the tax year 2010/11 my tax code for my pension was 499L and my salary tax code was BR accum.
I had already received a PAYE Coding Notice in September to say that my pension code was changing from 499L to K120 as they had worked out that I had underpaid by £564 (as mentioned further up this thread)
The latest letter states that I have a personal allowance of 6475 for 2010/11 This is what the Tax calc letter states
Pay 47151
Personal allowance 6475
Income tax chargable 40676
basic rate 20% on 37400 = 7480
higher rate 40% on 3276 = 1310
= 8790
Tax paid 8134
underpaid 656.
I wrote to them and asked why the under payment had gone from £564 to £656 and why they have shown a personal allowance of £6475
their reply
the underpayment is for tax year ending 5 April 2011
for year ending 2012 your code has been reduced which has caused an estimated underpaid amount of £564
a personal allowance of £6475 refers to 2010/11. For the current tax year your personal allowance is £7475. however you have a deduction of £8692 which leaves you with minus £1217 which makes code K120
I really am illiterate when it comes to tax matters. Is there anyone that can let me know if this is right.
(you may have to read the whole thread )
Thank you0 -
It looks right, assuming the total pay and tax paid is right (you can check these on your P60). I think you're confusing this tax calculation (which refers to last year) with the previous tax code change which refers to an underpayment so far this tax year.
As an aside, in your situation, unless you particularly need the level of income you're getting now, it would be very beneficial to make pension contributions from your employment income to take you below the 40% band. This could save you 52% tax & NI (if you can do it via salary sacrifice) or 40% otherwise, and as you've already got a pension over £20k you should be able to draw it all out without restriction once retired ("flexible drawdown"), and only pay 15% tax if you make sure you do it in stages such that you don't go into HRT once retired.
It could be worth seeking advice on the above if you don't understand...0
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