Tax Code - Wrongly Changed?

jsj25

HI all,

A few days ago I received a letter from HMRC advising that my tax code had been changed. I started a new job just over a month ago - my P45 has been given to my new employer, and the tax code I was on with both my old employer and my new one, according to my first slip, was 1150L, which I believe is correct.

In HMRC's letter they advised that I owe them £192 and that my tax code has now been adjusted to 876L X and that more tax will be deducted each month until the end of the tax year to pay it back.

Problem is, I can't work out why this has been changed. AFAIK all the tax I paid in my last job was the correct amount. The only thing I can think of is that they're trying to tax me for the income I receive from my part-time self-employed work that I've been doing since August. However, I am registered as a sole trader and will be doing a self assessment next April. I've been setting aside 20% of all my SE earnings and was under the impression I'd pay the tax due once my self-assessment had been done. (The amount they've charged me also equates to more than 20% of my SE earnings, which is why I'm not sure if this is what they're factoring in.)

I've tried calling HMRC but they're insisting that someone will have to call me back about it. Not had much luck on that front yet, though, so I thought I would turn to the good people of MSE to see what you think. Does it sound like my tax code was changed because of my SE income? And how easy do you reckon it would be to change it back?

Thanks in advance, everyone!

BoGoF

When you received your first payslip from your new employer did the operate 1150L on a cumulative basis or a week/month 1 basis - i.e. does the payslip "Taxable pay to date" include that from employment 1?

spadoosh

I cant imagine it is to do with self employed earnings. How would they know about it?

What your earnings to date and tax paid to date for all your income?

Its usually very easy to get tax codes changed, you just need to give HMRC all relevant info about your earnings and they will issue you the appropriate tax code (and tell you to do a self assessment).

I couldnt tell you why its changed, im guessing HMRC wouldve recieved updated information.

The L suggests you have a normal tax code and the x denotes that it is non cumulative which suggests somethings gone amiss a long the way.

chrisbur

jsj25 wrote: »

HI all,

A few days ago I received a letter from HMRC advising that my tax code had been changed. I started a new job just over a month ago - my P45 has been given to my new employer, and the tax code I was on with both my old employer and my new one, according to my first slip, was 1150L, which I believe is correct.

In HMRC's letter they advised that I owe them £192 and that my tax code has now been adjusted to 876L X and that more tax will be deducted each month until the end of the tax year to pay it back.

Problem is, I can't work out why this has been changed. AFAIK all the tax I paid in my last job was the correct amount. The only thing I can think of is that they're trying to tax me for the income I receive from my part-time self-employed work that I've been doing since August. However, I am registered as a sole trader and will be doing a self assessment next April. I've been setting aside 20% of all my SE earnings and was under the impression I'd pay the tax due once my self-assessment had been done. (The amount they've charged me also equates to more than 20% of my SE earnings, which is why I'm not sure if this is what they're factoring in.)

I've tried calling HMRC but they're insisting that someone will have to call me back about it. Not had much luck on that front yet, though, so I thought I would turn to the good people of MSE to see what you think. Does it sound like my tax code was changed because of my SE income? And how easy do you reckon it would be to change it back?

Thanks in advance, everyone!

Owing £192 strongly suggests that you have received two tax allowances in one tax month. This happens sometimes when you change jobs. The last payment from your old employer and the first payment from your new employer sometimes fall in the same tax month ( 6th of each month to 5th of the next month )
Check your P45 part 1A to see what the tax month number is and compare to your first payslip tax number; if they are the same then both were paid in the same tax month. This means that by the end of the tax year you will have received thirteen payments.

The above assumes you were on emergency tax code for the first payment with your new employer if you want a check on your exact tax position you need to give full details of taxable pay, tax, taxable pay to date and tax paid to date from P45 and payslip.

[Deleted User]

chrisburgh is spot on as usual. The tax free allowance is £11500 which 'saves' tax of £2300 per annum or £191.67 per month.

xylophone

chrisburgh is spot on as usual.

He's had a city named after him as recognition of his services to the forum......:D

agrinnall

xylophone wrote: »

He's had a city named after him as recognition of his services to the forum......:D

About time too, and henceforth I wish to be known as agrinnallopolis.

jsj25

Some brilliant replies here, guys, thank you so much! As you can probably tell, I'm quite new to all this so I really appreciate the help! (Definitely much more helpful than HMRC, who are still yet to call me back...)

BoGoF wrote: »

When you received your first payslip from your new employer did the operate 1150L on a cumulative basis or a week/month 1 basis - i.e. does the payslip "Taxable pay to date" include that from employment 1?

I've just taken a look and no, the employee-to-date total is literally just my first month's pay with my new employer. No reference to my earnings at my previous job.

spadoosh wrote: »

I cant imagine it is to do with self employed earnings. How would they know about it?

What your earnings to date and tax paid to date for all your income?

Its usually very easy to get tax codes changed, you just need to give HMRC all relevant info about your earnings and they will issue you the appropriate tax code (and tell you to do a self assessment).

I couldnt tell you why its changed, im guessing HMRC wouldve recieved updated information.

The L suggests you have a normal tax code and the x denotes that it is non cumulative which suggests somethings gone amiss a long the way.

My guess about my SE earnings was just a stab in the dark - couldn't think what else it might be! Thought it might have had something to do with my NI number, but apparently not.

According to my P45, my total pay was £12,387.34, and the total tax paid was £942.80. I believe this includes my final month's pay.

According to my first payslip from my new employer, I was paid £1,444.76 last month (pre-tax but post-salary sacrifice) and paid £97.00 in PAYE tax and £91.77 in NIC.

chrisbur wrote: »

Owing £192 strongly suggests that you have received two tax allowances in one tax month. This happens sometimes when you change jobs. The last payment from your old employer and the first payment from your new employer sometimes fall in the same tax month ( 6th of each month to 5th of the next month )
Check your P45 part 1A to see what the tax month number is and compare to your first payslip tax number; if they are the same then both were paid in the same tax month. This means that by the end of the tax year you will have received thirteen payments.

The above assumes you were on emergency tax code for the first payment with your new employer if you want a check on your exact tax position you need to give full details of taxable pay, tax, taxable pay to date and tax paid to date from P45 and payslip.

You're completely right about the tax month issue - both the P45 and new employer payslip are month number 8. However, I'm not quite sure I understand why this means I owe HMRC money. I paid tax on both sets of earnings last month, so how does that work?

Re: tax code, I was actually on 1150L for my first payment with the new employer rather than any emergency one, and from my calculations I paid the correct amount of tax. There was me thinking that avoiding an emergency tax code would mean I wouldn't have to end up calling HMRC. I wish!

As mentioned above, total tax to date according to the P45 is £12,387.34 and total tax to date is £942.80. Gross taxable pay on my first payslip is £1,444.76 and £97.00 went to tax.

[Deleted User] wrote:

chrisburgh is spot on as usual. The tax free allowance is £11500 which 'saves' tax of £2300 per annum or £191.67 per month.

Sorry, I'm probably being really thick here - can you explain how the tax free allowance £11,500 saves £191.67 per month?

Dazed_and_confused

You only get one Personal Allowance per tax year, not one for each job.

So both employers have given you one months worth of allowances (in month 8).

One months worth of allowances is £11500/12 = £958.33

£958.33 x 20% (the basic tax rate) = £191.66

The emergency tax code is currently 1150L, operated on a non-cumulative basis i.e. used against that months wages in isolation.

If you want to avoid the lower tax code you can ask HMRC to issue the 1150L tax code on a cumulative basis and whatever tax you owe (jin relation to these two PAYE employments) will be deducted by your new employer the first time they use the new 1150L tax code. Same tax paid just next payday rather than spread over the next few months to 5 April 2018.

jsj25

Dazed_and_confused wrote: »

You only get one Personal Allowance per tax year, not one for each job.

So both employers have given you one months worth of allowances (in month 8).

One months worth of allowances is £11500/12 = £958.33

£958.33 x 20% (the basic tax rate) = £191.66

The emergency tax code is currently 1150L, operated on a non-cumulative basis i.e. used against that months wages in isolation.

If you want to avoid the lower tax code you can ask HMRC to issue the 1150L tax code on a cumulative basis and whatever tax you owe (jin relation to these two PAYE employments) will be deducted by your new employer the first time they use the new 1150L tax code. Same tax paid just next payday rather than spread over the next few months to 5 April 2018.

Oh, I see! That makes every complete sense, thank you so much. Sounds like there's no point paying it all in one hit so I might as well stick with the new code. Frustrating, but makes sense!

Thank you again.

badmemory

Nit picking here a bit but if you get the code changed back to the normal 1150L in March then it will avoid any possible (minor) under/overpayment for the year.