They have lowered my tax code????

dtaylor84

puddy wrote: »

what i mean is, they have changed the code which means i have less allowance. so what happens if this year, i do not get taxable benefits of £185?

The extra tax paid as a result of the lower allowance (if you earn enough to pay tax) will be included on your P60, as I said.

If you complete a self assessment, this tax will be deduced from the tax you are calculated to owe. If the result is negative you can get the tax refunded.

If you don't complete a self assessment, you may have to apply to HMRC to have them refund the overpayment (if any).

puddy

ok, i know im being a bit dim but i dont get this.

my current year tax code is now lower. i usually earn (along with my self employed income) over the threshold so i do pay tax every year, but just not with that particular employer. so when it comes to the tax return for year 11-12 (with my lowered tax code), the tax calculated will look correct because i have a lowered tax code, but i may not have (and speaking to someone today, will not have) taxable benefits this year as i wont be working for that employer any more this year.

so ive simply had allowance taken off me and the tax will be calculated using that code? meaning i pay more tax, but it wont look as if ive paid too much tax because of the code

why dont they just ask me now for the tax from year 10-11 for the £185 benefits if it wasnt on the p60

and why arent taxable benefits on a p60 anyway?

System

Taxable benefits are on the P11D so no point including on the P60

If you know you will not be receiving those benefits this year, then simply phone HMRC and inform them of this fact, they should adjust your tax code for this year, inform your employer of the corrected tax code and then you will pay the appropriate tax via PAYE.

Horizon81

jimmo wrote: »

Spot on.
Just to emphasise the point it is important to understand that with one exception your tax code for a particular year is intended to reflect your potential tax liability for that particular year. If you received taxable benefits in the past your tax code should reflect what HMRC anticipates you will receive in taxable benefits in the current year.
The one exception is that HMRC can adjust your code in order to collect an underpayment for a previous year. In that case the description should be very clear, to collect an underpayment.

The amount on your P11D is the amount they reduce your tax code by, so in effect they are collecting an underpayment from the previous year aren't they? So if I make no excess mileage claims this year then my tax code will remain the standard one next year.

dtaylor84

puddy wrote: »

so ive simply had allowance taken off me and the tax will be calculated using that code? meaning i pay more tax, but it wont look as if ive paid too much tax because of the code

The tax code is only used to calculate how much tax to collect through PAYE during the tax year.

It is not used at the end of the tax year to work out how much tax you should have paid (and whether any under/over-payment has been made).

So saying "it won't look as if I've paid too much tax because of the code" is wrong - the amount of tax you owe will be calculated based on your earnings and taxable benefits received during the year. If you've paid more than you owe, the overpayment can be refunded.

puddy

Horizon81 wrote: »

The amount on your P11D is the amount they reduce your tax code by, so in effect they are collecting an underpayment from the previous year aren't they? So if I make no excess mileage claims this year then my tax code will remain the standard one next year.

no, this is my point, because i complete a tax return, when i do it somtime this month, that £185 will be entered on the form (as it was for 10-11) and i will pay tax on it, so it shouldnt be coming off this years tax cod (11-12)

puddy

dtaylor84 wrote: »

The tax code is only used to calculate how much tax to collect through PAYE during the tax year.

It is not used at the end of the tax year to work out how much tax you should have paid (and whether any under/over-payment has been made).

So saying "it won't look as if I've paid too much tax because of the code" is wrong - the amount of tax you owe will be calculated based on your earnings and taxable benefits received during the year. If you've paid more than you owe, the overpayment can be refunded.

ok, so the code is lowered but i still have the same allowance as a single person under 65? is that right? my actual allowance doesnt change?

dtaylor84

puddy wrote: »

ok, so the code is lowered but i still have the same allowance as a single person under 65? is that right? my actual allowance doesnt change?

Yes, your allowance is unchanged.

puddy

dtaylor84 wrote: »

Yes, your allowance is unchanged.

ok, its all clear now, i thought the allowance was lowered when the code was lowered, thats what i was outraged about!

Horizon81

Surely the allowance is lowered??

The standard allowance is £7475 which equates to 747L. Using my coding notice as an example, which states £7475 minus £20 (excess payments from 2010-11) = £7455, which equates to my new tax code 745L.

In other words, to account for the £20 extra I gained tax free last year, £20 has been taken off my allowance for this year, so that in effect I'm paying back what I should have paid last year.

When I phoned HMRC to query, the guy said that the £4 (20% of £20) will be taken off my next payslip once my employer adjusts the code, so yes it must reduce your allowance for this year. That's the whole point isn't it?