Nil tax code - confused

The_Duchess_3

Hi am a little bit confused (doesn't take a lot)! Went bankrupt in October and have just had a letter about the IPA that has been set out.
I had a letter yesterday from HM Customs about my nil tax code which will obviously last until April. Now I presumed that meant that the tax I would've paid now gets paid to the OR but I'm not so sure as some threads seem to suggest that I get to keep it???

Is it included in the IPA or do I get to keep it or do I have to pay it on top of the IPA???

Do apologize, as I said doesn't take a lot to confuse me lol.

kepar

The tax you have so far paid this tax year will end up with the OR. When your nil tax code gets applied you pay the tax with your agreed IPA. As you say it will end at April when you just go back to paying the IPA only.

Things may have changed since my wife got an IPA, but she agreed an IPA with the OR, Moonbeaver then wanted 3-4 months past payslips to estimate her monthly tax. This amount was added to the IPA when the nil tax code got applied to her payslip.

You have agreed an IPA, have Moonbeaver requested the payslips yet and if they have , have they given you a figure to pay ?

If they have when your payslip shows you have paid no tax, increase your payment to Moonbeaver for the months of non payment of tax.

tigerfeet2006

There are two types of IPA. A Nil Tax Code IPA and a surplus income IPA.

The NTcode is applied and you will find the excess tax in your wage packet. You do not spend this, you keep it to one side and when Moonbeever ask you for it. This lasts till the end of the tax year.

The other one is where you have agreed your SoA with the OR and the amount you have to pay from your excess income for 36 months. This can be altered up, down or suspended if your income changes. Suspended months count towards the 36 months

The_Duchess_3

Hi guys thanks for your replies. I'm not quite sure what I have got, to be perfectly honest I don't seem to have had much correspondance with the OR, I had a very brief 5 minutes phone interview then sent in all my paperwork (years worth of bank statements 3months of wage slips etc) and my SOA. I then had a letter come back stating that I had an IPA for 36 moths of £22 p/m (no mention of moonbeaver) had to sign that and send it back, to which they said that they would sign it and send it back to me (still waiting for this to arrive!!!!).
So I am not really sure if moon beaver is involved.
It all rather confusing and seems more so due to lack of communication from OR or maybe my case is so straight forward it seems confusing and maybe I expect it to be more complex than it actually is????

Ineedaname

Moonbeever will be involved once you receive the signed copy of your IPA back from the OR. Don't fret about this as you won't have to pay the £22 IPA until the OR has sent the form to you along with details of how and where to pay (Moonbeever). The alternative will be the OR will send the form to you and you'll also then receive contact from Moonbeever - not quite sure which applies or if it varies across the OR offices how they action this.

With the nil tax, as soon as you see your tax code change on your payslip and more money in the 'net pay' box than you would normally get, then just put what you would normally pay in tax to one side in a separate bank account. Once you are told how to pay then you just add that to the IPA amount.

Your last nil tax and IPA payment will be from your March payslip. In April your tax code should return to normal and you just reduce your payments to the £22 IPA agreed.

bcljnk

DH went BR on 27th oct, not had his phone interview yet (its tomorrow) as there was a problem their end and they changed it, but we have sent all the stuff off, wage slips, statements ect....also had a nil tax code letter, but nothing else...is an IPA were you have excess money, as he doesnt, but i am unsure how the nil tax code thing works....unsure what he normally pays, but i did put it in his forms, so can check if need to.

Ineedaname

A nil tax code/IPA just means he won't pay tax on his wages so his payslip will show a higher take home pay. However, he'll need to put the money to one side that he would normally have paid in tax and then pay that to Moonbeever when advised on the details.

A surplus IPA is, as you have said, when there is surplus after all reasonable expenditure has been accounted for. If less than £20 pcm surplus then no IPA will be due, if more than £20 then the entire amount of surplus (including the first £20) will be subject to an IPA agreement. This runs for 36 months from the date it is set up and can be varied up or down as financial circumstances change throughout the life of the IPA.

kepar

With the nil tax, as soon as you see your tax code change on your payslip and more money in the 'net pay' box than you would normally get, then just put what you would normally pay in tax to one side in a separate bank account. Once you are told how to pay then you just add that to the IPA amount.

Where did this come from?

As I said in post 2, Moonbeever will contact you for pay slips to assess how much tax you have to pay.

You will have started your IPA by this time and when the nil tax shows the increase your standing order.

dtr1001

Does everyone who pays tax on their earnings and goes bankrupt get a nil tax code? Under what circumstances does this happen? Thanks

kepar

Basically if you go br then if you are a tax payer, any tax for that year goes to the OR. What you have paid so far HMRC will send to the OR, but any future tax of the financial year you will be instructed to pay to Moonbeever. This will happen when a nil-tax code appears on your pay slip.

If you were to go br late in the year say February or March there would not be enough time to set the nil tax code up.

Ineedaname

Hiya dtr - for future reference, if you have a new question can you create a new thread please? Members often don't return to a thread where the opening post (OP) question has been answered, so a new thread will get you more views and therefore more responses.

However, fairly easy to answer this one.

If you are PAYE then a nil tax code will be sent out by HMRC once they are notified of the BR. The employer then doesn't deduct tax and the employee receives a higher amount net pay. BUT the employee/BR then needs to put that money aside safely until they are told how to pay it to Moonbeever (the company who collect money for the OR).

The only circumstances I know of where it might not happen is when someone goes BR towards the end of the tax year. Often there's just not enough time then to set up the BR tax code before the last wages run.

Nil tax codes only run until the end of the current tax year or until a change in employment occurs, then it resets to the individual's 'normal' tax code.