Use of Tax Code

lindabea

My sister received a tax code of 220L for 17/18 against her private pension. However, I worked out that her tax free allowance after deducted her SP is 2207. My understanding is that her pension provider would use 2200 as her tax free allowance to calculate her tax. So would this mean that she is losing £7 on her tax free allowance and therefore paying £1.40 more tax. I know it's not much, but is that how it works out.

Dazed_and_confused

No, her pension company will use 2209.

So she will have underpaid tax by a few pence, which is how PAYE has always worked. The tax due is ignored unless HMRC send you a calculation (for some other reason).

lindabea

Dazed_and_confused wrote: »

No, her pension company will use 2209.

So she will have underpaid tax by a few pence, which is how PAYE has always worked. The tax due is ignored unless HMRC send you a calculation (for some other reason).

Thank you for your quick reply. I used the following link which seems to be misleading as it uses 2200 as the tax free allowance

http://www.uktaxcalculators.co.uk/

I'm sure that you are correct in saying that a '9' is added as the last digit of the tax code. I seem to remember this from the days I was working.

molerat

HMRC do not round,they simply truncate. Anything from £2200 to £2209 will be given a code of 220. The extra £9 in the way the tax tables work allows for this and therefore gives an allowance of £2209.08 for a 220 tax code. When you split a tax code between jobs they will deduct 1 point from the second and subsequent codes so that the £9 is only given once. As an example my tax allowance is £12100 and is split across 2 codes, 1045 and 164, which adds up to 1209 and not 1210 but gives me a tax free £12108.12.