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Tax code and Gift Aid
Comments
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No what I was getting at was that both sources of income lay within the basic rate band. One source has the personal allowance attached to it and the other source has BR.
The tax code has been lowered by an amount to take into account that part of the total income (around £1k) will have to be taxed at higher rate.
Both sources of income will still attract only basic rate tax.
What I was trying to find out was how the deduction was worked out.
So basically if the amount into higher rate tax was £1k, would the personal allowance be lowered by £1k?
The calc is in my post above. But to answer your post. Yes, your understanding is spot on.
1k into HR band would need to collect an extra £200 (40% - 20% already paid). The coding deduction would be £200 / 20% = 1000.
At least in a straight forward case. Best not to think about the more complex scenarios.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
It calls it Adjustment to Tax Rate band.
I was trying to see if the amount that they are witholding was higher than it really should be or if the calculation was done in some other way.
For example, I've worked out I should be about £1k over with my total income but they have witheld £2,473.
Ah, see where you are coming from. It sounds like they've withheld more based on their estimate of your income. All you'll need to do is phone them with your estimated figures for both sources.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
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Ah, see where you are coming from. It sounds like they've withheld more based on their estimate of your income. All you'll need to do is phone them with your estimated figures for both sources.
They always overestimate my income but so far I have managed to just stay under the higher rate tax threshold so each year I have phoned up and got it amended.
Half of the problem is that they want to include my savings/dividends which I have always asked them not to as I then make a pension payment to take me back to basic rate. Next year I will do the same but can't use quite the same argument as before.0 -
They always overestimate my income but so far I have managed to just stay under the higher rate tax threshold so each year I have phoned up and got it amended.
Half of the problem is that they want to include my savings/dividends which I have always asked them not to as I then make a pension payment to take me back to basic rate. Next year I will do the same but can't use quite the same argument as before.
You can always give them an estimate of your savings interest / dividends etc and your pension contributions too.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
They always overestimate my income but so far I have managed to just stay under the higher rate tax threshold so each year I have phoned up and got it amended.
Half of the problem is that they want to include my savings/dividends which I have always asked them not to as I then make a pension payment to take me back to basic rate. Next year I will do the same but can't use quite the same argument as before.
Not withstanding the fact that, in effect, they are trying to collect any additional tax on savings and dividend income in advance by including it in your code number.0 -
nomunnofun wrote: »Exactly the point that I was trying to make.
No I think ceiberman had it spot on with what I was looking for. I understand what HMRC are doing - I just wanted to make sure I had calculated it correctly.0 -
nomunnofun wrote: »Exactly the point that I was trying to make.
Not sure I follow...This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
nomunnofun wrote: »Not withstanding the fact that, in effect, they are trying to collect any additional tax on savings and dividend income in advance by including it in your code number.
Some people like that as it avoids a bill at the end of the year. Where pension contributions will offset HR liability that can be taken into account too.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
You can always give them an estimate of your savings interest / dividends etc and your pension contributions too.
They have a good idea already from my tax return. However in previous years I preferred not to have it included as the amount varied from year to year and I preferred to have it handled via my tax return. I always made a pension payment that negated any higher rate tax liability. In the odd year it wasn't needed as i didn't creep into higher rate tax.nomunnofun wrote: »Not withstanding the fact that, in effect, they are trying to collect any additional tax on savings and dividend income in advance by including it in your code number.
They probably are although they have been told not to, just the same as I told them not to include pension tax relief in my tax code.0
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