Advice re PAYE coding notice

enthusiasticsaver

My OH received two PAYE coding notices mid Feb, one for 2014-2015 and one for 2015-2016. We knew what this was about as he changed a lease car for a company car in December and realised that he would have to pay tax on it.



The query I have is that the tax code for the current year was changed to 821L which was supposed to replace his tax code of 1012L which was the code prior to the company car benefit. So far so good and his code was changed from his February payday so for the last two months he was paying the correct code.




The new code for 2015-2016 was 195L which it said was to replace 1072L?? and included not only the car benefit of 7009 but also an underpayment restriction as it reckoned he owed £702.56 from this tax year. I think that as his code was adjusted from February there should not be this underpayment restriction. Anyone know anything about company car tax?

Skint_yet_Again

enthusiasticsaver wrote: »

My OH received two PAYE coding notices mid Feb, one for 2014-2015 and one for 2015-2016. We knew what this was about as he changed a lease car for a company car in December and realised that he would have to pay tax on it.



The query I have is that the tax code for the current year was changed to 821L which was supposed to replace his tax code of 1012L which was the code prior to the company car benefit. So far so good and his code was changed from his February payday so for the last two months he was paying the correct code.




The new code for 2015-2016 was 195L which it said was to replace 1072L?? and included not only the car benefit of 7009 but also an underpayment restriction as it reckoned he owed £702.56 from this tax year. I think that as his code was adjusted from February there should not be this underpayment restriction. Anyone know anything about company car tax?

Hi enthusiasticsaver

If your OH tax code was 1012L and dropped to 821L this would mean the tax allowances were somewhere between 10129 to 10120 (lets say 10120 for this example) and reduced to somewhere between 8219 and 8210 (lets say 8210 for this example)

So for example 10120 down to 8210 is a drop of 1910 which should be the car benefit from Dec (when he got the car) to 5/4/15. The tax due on this would depend on whether your OH was a basic rate or higher rate taxpayer. If he was a higher rate taxpayer - lets say 40% - then the tax due on the car in 2014-15 would be 1910 x 40% = 764

PAYE would normally try to collect tax equally over 12 months from 6/4/14 to 5/4/15 at £63.66 (approx.) per month. However we are already near the end of the tax year so it cannot spread the tax on months that have already passed.

The tax code 821L should have been issued on what is called a week 1/month 1 basis - there should be a "wk1" or "mth 1" or " /1" or "nc" (non cumulative) next to the tax code 821L on his Feb payslip. Tax codes issued in mid Feb would assume one payday left in the tax year in march and so the week 1/month 1 would stop the tax code collecting the whole amount of £764 in one month.

How much extra tax did he pay in February ? Did the tax code show week 1 / month 1 as indicated above - if so the extra tax he paid in Feb was not the total amount due on the car in 2014-15.

If the estimated total tax due in my example above is £764 and we deduct the assumed 1 month deduction in March of £63.66 this would leave estimated tax still due of £700.34 to carry forward and collect in the 2015-16 tax code.

The tax office will check the tax due for 2014-15 when they get the P60 / P11D for company car from the employer and check the amount in the tax code. (assuming your OH does not complete Self Assessment tax returns)

I hope that makes sense

enthusiasticsaver

Skint_yet_Again wrote: »

Hi enthusiasticsaver


So for example 10120 down to 8210 is a drop of 1910 which should be the car benefit from Dec (when he got the car) to 5/4/15. The tax due on this would depend on whether your OH was a basic rate or higher rate taxpayer. If he was a higher rate taxpayer - lets say 40% - then the tax due on the car in 2014-15 would be 1910 x 40% = 764

PAYE would normally try to collect tax equally over 12 months from 6/4/14 to 5/4/15 at £63.66 (approx.) per month. However we are already near the end of the tax year so it cannot spread the tax on months that have already passed.

The tax code 821L should have been issued on what is called a week 1/month 1 basis - there should be a "wk1" or "mth 1" or " /1" or "nc" (non cumulative) next to the tax code 821L on his Feb payslip. Tax codes issued in mid Feb would assume one payday left in the tax year in march and so the week 1/month 1 would stop the tax code collecting the whole amount of £764 in one month.

How much extra tax did he pay in February ? Did the tax code show week 1 / month 1 as indicated above - if so the extra tax he paid in Feb was not the total amount due on the car in 2014-15.

If the estimated total tax due in my example above is £764 and we deduct the assumed 1 month deduction in March of £63.66 this would leave estimated tax still due of £700.34 to carry forward and collect in the 2015-16 tax code.

The tax office will check the tax due for 2014-15 when they get the P60 / P11D for company car from the employer and check the amount in the tax code. (assuming your OH does not complete Self Assessment tax returns)

I hope that makes sense

Thanks and to a degree it makes sense thanks Skint. You are right in that the February payslip says M1 beside the tax code and the same against the March payslip. We reckon the tax on the car should be around £200 per month so £700 for 3 and a half months sounds right and yes he is a HR tax payer. He did not receive the car until December 2014. Surely if he has paid £200 in February (difficult to know exactly as he gets erratic pay due to overtime) and £200 in March the underpayment for 2014-2015 should be only £300?


The Paye coding notice for 2015-2016 says it replaces a code for 1072L which he has never had but seems to be working on his paycode up until January which was 1012 + a 600 increase for the new tax year). I should have thought it should replace the code they sent early Feb and have been working on since his February pay - 821L. I have queried it with the tax office by filling out their online query form anyway and as you say hopefully it will be sorted once his company send off the P11D.

Anatidaephobia

enthusiasticsaver wrote: »

The Paye coding notice for 2015-2016 says it replaces a code for 1072L which he has never had but seems to be working on his paycode up until January which was 1012 + a 600 increase for the new tax year). I should have thought it should replace the code they sent early Feb and have been working on since his February pay - 821L. I have queried it with the tax office by filling out their online query form anyway and as you say hopefully it will be sorted once his company send off the P11D.

It's just an automated message that their system adds. 1072L was the tax code it will have already calculated for 2015/16. After the change in car, the code has been recalculated and a new one sent out but it automatically includes a message referring to the previous code for that tax year. As the year hasn't started yet, 1072L hasn't been used anyway and it won't be used now that the code 195L has been sent out to replace it.

Skint_yet_Again

enthusiasticsaver wrote: »

Surely if he has paid £200 in February (difficult to know exactly as he gets erratic pay due to overtime) and £200 in March the underpayment for 2014-2015 should be only £300?

Skint_yet_Again wrote: »

Hi enthusiasticsaver
....The tax office will check the tax due for 2014-15 when they get the P60 / P11D for company car from the employer and check the amount in the tax code. (assuming your OH does not complete Self Assessment tax returns)

Your OH employer will send HMRC his P60 details after 5/4/15 and the P11D forms have to be in to HMRC by July I think - so once they have them they will check the estimated amount of underpayment for 2014-15 and adjust his 2015-16 tax code to reduce the amount as necessary. The underpayment in his 2015-16 code will be spread over 12 months and so if the amount is reduced he will get a refund in his wages when the tax code changes.

Hope that helps