Tax Allowance £9224

danicheng

Hi All,

I was told by HMRC that I underpaid tax last year of around £440 which would mean they would collect an extra £40 odd pound each month over the 12 months.

However my tax code is S992L and it says that my underpayment of -£2,336 is taken from my tax allowance of £11560 (I also get £60 tax relief form uniforms), which gives me a tax allowance of £9224 for 2017/2018.

My salary is £25500 and HMRC explained why my tax allowance was so low due to underpayments last year. However I did not understand what she was explaining.

Can anyone advise why my tax allowance would be so low?

Dazed_and_confused

On a salary of £25k your tax code being reduced by £2336 will mean you pay an extra £467 in tax (£2336 x 20%) which is just under £39/month.

Beenie

People often get confused with the coding restriction for an underpayment.

To keep things simple, if you earned £80 and the tax rate was 25%, you would pay £20 on that sum.

Similarly, when you owe tax, HMRC has to put in a figure which would collect that amount of tax. So a restriction of 80 in the coding would result in an actual deduction of £20.

Your restriction of 2000-odd will result in the collection of £400-odd (and not £2000 which people think it means and naturally are frightened about).

Hope this helps.

danicheng

Beenie wrote: »

People often get confused with the coding restriction for an underpayment.

To keep things simple, if you earned £80 and the tax rate was 25%, you would pay £20 on that sum.

Similarly, when you owe tax, HMRC has to put in a figure which would collect that amount of tax. So a restriction of 80 in the coding would result in an actual deduction of £20.

Your restriction of 2000-odd will result in the collection of £400-odd (and not £2000 which people think it means and naturally are frightened about).

Hope this helps.

Thanks for explaining this. This helps a lot