HMRC 'live' tax codes - weird calculation?

NordicNoir

[Deleted User] wrote:

You are not having a good time with this!

From subsequent new tax codes received, HMRC have been using month 3, rather than month 4 to calculate the tax underpayment. I am not sure if this is because the payslip date is mid-month, but either way, the calculation is incorrect, they must compare like with like!

Does this not make less sense as 'your' month 3, being mid-month, is earlier?

No, not a great time, but I do enjoy getting to the bottom of things!:D

By the using an earlier month, you lose out on one twelfth of the tax code and tax bands, hence they think that the underpayment is bigger than the real underpayment by 1 month, each time that the underpayment is calculated.

I was using the payment date trying to guess why HMRC have calculated this incorrectly, just grabbing at straws! The other option is too scary - that the calculation will be wrong for every tax payer once they have had an event that triggers a tax code recalculation!:eek:

badmemory

Actually, if you look at this from a maths/computer point of view, bearing in mind that "it" seems to be working daily....

If you get paid on the 15th of the month then by 30th of the month you are already (in computerspeak) 15 days in arrears, so the new code is generated to correct for this. Anyone paid on 30th of the month would have no arrears.

When someone blames the computer remember the RIRO rule. Rubbish in, rubbish out! Until we get totally self programming computers then they will only do what they have been told to do.

NordicNoir

badmemory wrote: »

Actually, if you look at this from a maths/computer point of view, bearing in mind that "it" seems to be working daily....

If you get paid on the 15th of the month then by 30th of the month you are already (in computerspeak) 15 days in arrears, so the new code is generated to correct for this. Anyone paid on 30th of the month would have no arrears.

When someone blames the computer remember the RIRO rule. Rubbish in, rubbish out! Until we get totally self programming computers then they will only do what they have been told to do.

Sadly, much of our tax system defies maths/computer logic e.g. July is considered as being 6th July to 5th August.

To me, it seems that the program has been designed to calculate an underpayment, regardless of pay frequency. BUT by ignoring pay frequency, and doing it on exact days, they are building in errors where there should be none.

The irony of course is that this system has been brought in to cut down on under and overpayments of tax. In this example, it is guaranteed that by the end of the tax year, tax will have been overpaid!