Tax code change 1050L to 1016L

greensalad

I'm paid weekly as a contractor but on PAYE.

I have just had my first paycheque of the new tax year that has been a complete 40hrs (I've had some time off previous weeks) and was expecting roughly the same as last tax year, but have noticed I am now £80 a week down, a not insignificant amount.

I'm down on income tax, NI contributions and student loan repayments have stayed almost the same.

I am still being paid the same amount pre-tax, but the tax code has changed.

I can't find info on what the tax code means, why has this change occurred? I don't receive any taxable benefits to my knowledge (no medical, no car allowance, nothing).

I've contacted my agency to ask but I expect they will fob me off with some jargon as they usually do when I question things about my paycheque.

xylophone

The standard code for 2015 -16 was 1060L and for this tax year is 1100L.

Have you received a Notice of Coding from HMRC for either year?https://www.gov.uk/tax-codes/overview

https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees

chrisbur

greensalad wrote: »

I'm paid weekly as a contractor but on PAYE.

I have just had my first paycheque of the new tax year that has been a complete 40hrs (I've had some time off previous weeks) and was expecting roughly the same as last tax year, but have noticed I am now £80 a week down, a not insignificant amount.

I'm down on income tax, NI contributions and student loan repayments have stayed almost the same.

I am still being paid the same amount pre-tax, but the tax code has changed.

I can't find info on what the tax code means, why has this change occurred? I don't receive any taxable benefits to my knowledge (no medical, no car allowance, nothing).

I've contacted my agency to ask but I expect they will fob me off with some jargon as they usually do when I question things about my paycheque.

A tax code change from 1050L to 1016L is not going to make the sort of tax change that you say you have, even on the 45% band we are talking only about £3 a week. To see what is happening you need to give details of last two payslips for last year and the first one for this year.
Gross, tax, gross to date and tax to date for each.

greensalad

Because of Easter I'll provide Week 49 & 48 in comparison to Week 3, hopefully that's OK, these are the only recent ones where I have put in a standard 40hrs.

Week 3 of 16/17 - tax code 1016L
Gross income £1202
National Insurance £88.14
Tax £279.32
Student Loan Deduction £77
Total take-home £757.54
Gross-to-date £3557.62
Tax-to-date £818.76

Week 49 of 15/16 - tax code 1050L
Gross income £1202
National Insurance £86.94
Tax £200
Student Loan Deduction £78
Total take-home £837.06
Gross-to-date £24,428.73
Tax-to-date £2905

Week 48 of 15/16 - tax code 1050L
Gross income £1202
National Insurance £86.94
Tax £200
Student Loan Deduction £78
Total take-home £837.06
Gross-to-date £23,226.73
Tax-to-date £2705

So as you can see, my 40hr weeks used to earn me £837, but now I'm receiving £79 less a week. My Student loan has gone down by a quid and my NI has gone up by a few quid. But this £79 loss is really hard hitting.

In week 51 I noticed I was signed up for a pension, which I didn't want and wasn't informed of. I quickly got the paperwork in to have the amount taken returned to me so that is all settled now.

Here's week 52, where I receive my pension contribution back, and also take some time off and use holiday pay for it.

Week 52 of 15/16 - tax code 1050L
Employee pension return £14.06
Payment from agency 32hrs £961.60
Payment for holiday taken 6.99hrs £210.05
= Gross income £1185.71
National Insurance £86.32
Tax £196.80
Student Loan Deduction £75
Total take-home £827.59

So in this pay you can see I didn't quite have enough holiday allowance to get a full 40hrs, but I was only about £10 down.

I have not received a notice of a new code. Shall I ring HMRC and find out?

Last year I did not reach higher rate, because I moved to this job in October. However projected this year I will reach higher rate possibly additional?

I believe my tax code last year was 1050L because I was in receipt of healthcare plan. I left my job 19th October. I worked through my LTD company from mid Oct to mid Dec (received two dividends) and then started this contract in mid Dec where I became PAYE again. I have not withdrawn a salary from my LTD company, only dividends totaling about £5000 but of course these haven't been declared yet (personal tax return is currently with the accountant). I currently do not receive any employment benefits from my agency or from my LTD company. I don't know what 1016L is meant for. I asked a tax accountant friend and she said she believed it meant I was in receipt of taxable benefits, but I'm not aware of any. I spoke to finance at my agency and they just said this was what HMRC had instructed them to use. Time to call HMRC? Or is it better to write?

greensalad

Just got off the phone with HMRC. Apparently I had unpaid NI to the sum of £148 that is being collected through my salary. They said I was sent a notice last April, but I didn't receive one. They said they can refund the tax and I can pay it myself manually, or I can carry on paying it. I guess I'll have the full amount cleared by next week so hopefully then I can call to have that removed and return to the normal tax code for 16/17. Though I have asked them to reissue the correspondence so I can check. But I had some income in 14/15 through sole trader status so it makes sense, perhaps I was short on my contributions.

chrisbur

Tax for last year and this year is correct.
Reason for the increase is last year you grossed about 26000 which meant that you were paying 20% tax on all income above your tax free allowance, and this year you are going to earn about 61000 which puts you into the 40% tax band.

Paye works on the basis of calculating your tax on what is due at the point you are paid so for example in week 1 you get 1/52 of your tax free allowance 1/52 of your 20% band tax allowance etc. This means that on your earnings you are already paying 40% tax on some of your earnings. This is what is causing just about all of the tax increase that you are seeing. Certainly check with HMRC about your tax code but it will make only a small difference to your tax.

Regarding last year the tax paid on your earnings may yet be adjusted. You will be making a self assessment I assume and you will declare both self employed and employed earnings; these may take you into the 40% /45% band, I cannot tell without knowing the figures.

greensalad

chrisbur wrote: »

Paye works on the basis of calculating your tax on what is due at the point you are paid so for example in week 1 you get 1/52 of your tax free allowance 1/52 of your 20% band tax allowance etc. This means that on your earnings you are already paying 40% tax on some of your earnings. This is what is causing just about all of the tax increase that you are seeing. Certainly check with HMRC about your tax code but it will make only a small difference to your tax.

OK I understand that. Annoyingly I will be leaving this job in mid June having earned only around £14k I believe, so I am already paying 45% yet I will barely be over my personal allowance.

In regards to that, when I leave this role can I write to HMRC for a rebate mid year or do I need to wait until March 2017? I do not plan to be an employee again after this role finishes and will earn income through dividends for the rest of the year (so will be setting aside 7.5% or whatever the higher-rate is for dividends now) so hopefully I can claim back tax? I think I've worked out I'll owe about £850 in tax from this employment but have shelled out around £3000.

xylophone

https://www.gov.uk/claim-tax-refund/youve-stopped-work

Would you be better served on line?

https://www.gov.uk/log-in-file-self-assessment-tax-return

greensalad

xylophone wrote: »

https://www.gov.uk/claim-tax-refund/youve-stopped-work

Would you be better served on line?

https://www.gov.uk/log-in-file-self-assessment-tax-return

Thanks, so it looks like I can submit the claim for rebate when I leave, but won't get the cash until the end of the tax year. Irritating!

xylophone

Thanks, so it looks like I can submit the claim for rebate when I leave, but won't get the cash until the end of the tax year.

Use the P50 as set out in the link?

greensalad

xylophone wrote: »

Use the P50 as set out in the link?

Thank you I've bookmarked it for when the time comes, but it still looks like it won't be paid until the end of the tax year.