HMRC put me onto 40% tax help !!

runner20k

Hi

I have recieved a tax letter notice informing me that my tax code is changing, had 3 so far in 3 months.

Could some one look at the figures below and advise is this is correct as i have been put on 40% tax on all earnings.

Personal Allowance = 8105
Car Benefit = 4713
Car Fuel = 4646
Underpayment restriction = 1831
Tax due = -3085

Tax code = K307

I have underpaid (estimated) = 732.53 which they turned into 1831@40%
Basis pay = 31520 per year
over time each year puts me on roughly £38500 per year

Have contacted tax office who state i was on a month by month tax basis for most of last year - (what does this mean)

The tax office state they have changed my tax code in march last year but i recieved no notification and neither did my employer, so i have been on 306L since 29/4/2010. when i should have been on K174 according to them. ( are they at fault for not notify me or employer)

Any advice on this would be appreciated or at least help to understand what they are doing etc. I always thought you where taxed so much at 20% then the rest at 40% ???

cheers Mark

Mikeyorks

runner20k wrote: »

I always thought you where taxed so much at 20% then the rest at 40% ???

You are ......... and will mainly be.

The £38500 plus the negative ('K') code of £3075 (plus the personal allowance of £8105) puts you on a total of £49680 for tax purposes. That includes the grossed up figure for the earlier year underpayment of £732. That exceeds the 40% threshold which stands at £42475 for 12/13. So you will pay tax at 40% on just over £7k of earnings. But the majority at 20%. If your £38500 estimate is correct.

All stems, I suspect, from the benefits in kind? It's essential to check your P11Ds each year ..... check your Code restrictions to it and make sure you're keeping pace. Otherwise you will perpetually find yourself catching up.

CLAPTON

your income for tax purposes is
38500
plus 4713
plus 4646

so total of 47,859

so unless you make pension payments you are a 40% tax payer
so for HMRC to recover the underpayment from the previous year of 732 they have assumed 40% tax is payable so made an adjust of
723/0.4 = 1830 rather than 723/0.2 = 3660

asuming the underpayment is correct then the K code is about right depending upon your actual salary this year; this may lead to an adjustment next tax year

Mikeyorks

CLAPTON wrote: »

your income for tax purposes is
38500
plus 4713
plus 4646

so total of 47,859

Quite right. And I have edited my earlier feeble attempt accordingly! £8105 down to £3075 .... is not £3075.

runner20k

Thanks for the responces , its good when its explained in plain english . the tax office totally lost me after hello.

Cheers for the help

Credit-Crunched

Options to look at reducing your higher rate exposure.

Do you pay into a pension?

Do you partake in share save scheme?

Could you lower your car c02 emissions to reduce the BIK payable, lots of newer company cars have emission below the 125 threshold so onyl a 15% charge levied

number9

...your p2 (notes) should explain the underpayment restriction and how the tax owing will be represented in terms of allowances required to collect via your code...??

Mikeyorks

number9 wrote: »

...your p2 (notes) should explain the underpayment restriction and how the tax owing will be represented in terms of allowances required to collect via your code...??

As post #1 ??

I have underpaid (estimated) = 732.53 which they turned into 1831@40%