Query with my tax code after handing my company car back.

p00hsticks

Pauli354 wrote: »

Thanks p00hsticks. For the bit highlighted above, are you saying that even though HMRC adjusted my code over the phone today to 724l, it will likely change again next month?

No, I'm saying that when your payroll gets your new (724L) tax code they will use it to calculate how much tax to deduct, and that - as it's a cumulative tax code - part of that calculation will include how much you have earned and how much tax you have paid this year so far.

p00hsticks

p00hsticks wrote: »

No, I'm saying that when your payroll gets your new (724L) tax code they will use it to calculate how much tax to deduct, and that - as it's a cumulative tax code - part of that calculation will include how much you have earned and how much tax you have paid this year so far.

Edit - to expand on this (my understanding - I don;t claim to be an expert).....

A tax code of 724L applied at the start of the year would mean that the first £603 ( = £7,240 / 12) of your earnings each month would be tax free.

In November (tax month 8) your payroll should look at your new tax code and say that up to the previous month in the year (tax month 7) you should have be able to earn £603 x 7 = £4,221 without tax being deducted.

In fact, because previously your tax code was only 256L, up to October you had only been given £1491 (2560 / 12 x 7) tax free.

Therefore in November, as well as getting the first £603 of earnings for month 8 tax free , you will also get the next £2730 also tax free to adjust for the fact that - going by your new tax code - you have overpaid tax to this point.

And in December (assuming that your earnings for November were large enough to use up all that 'extra' tax free allowance) the 724L tax cde will mean that the first £603 of earnings is tax free.

Pauli354

Excellent and thank you. So effectively my next salary in Nov I will have another tax free one off allowance of £2730? Thats where the rebate comes from that I have been seeing in other threads.

Thank you again, you have described the mechanism of this very well, much appreciated.

Dazed_and_confused

You definitely have to pay tax on the company car for the whole year, but only on the reduced benefit value which takes account of the car no longer being available to you

On a taxable salary of £42,000 and tax code 256L your year to date details at month 7 of the tax year (end of October) would be,

Total pay £24,500 (£3,500/month)
Total tax £5175.40 (£739/month)

Month 8 payslip on tax code 724L
Pay £3,500
Tax refund of £508.40

Months 9-12 payslips on tax code 724L
Pay £3,500
Tax £581.40

Pauli354

Dazed_and_confused wrote: »

You definitely have to pay tax on the company car for the whole year, but only on the reduced benefit value which takes account of the car no longer being available to you

On a taxable salary of £42,000 and tax code 256L your year to date details at month 7 of the tax year (end of October) would be,

Total pay £24,500 (£3,500/month)
Total tax £5175.40 (£739/month)

Month 8 payslip on tax code 724L
Pay £3,500
Tax refund of £508.40

Months 9-12 payslips on tax code 724L
Pay £3,500
Tax £581.40

Hi D&C. So are you saying in month 8 (Nov) I will have zero tax and a tax rebate?

Dazed_and_confused

Based on what you've posted yes.

Then it will revert to normal (based on the new tax code) for the rest of the tax year.

Pauli354

excellent, thank you.

Brewer2000

Hi all,
I am struggling to understanding this myself.

I have returned my company car and my tax code was 695 and is now 1262

So am I right in saying I will be earing 5670 more per year? 472.50 per month as I now dont pay this additional tax? The reason I ask is I have recieved a pay rise and my tax deductions has increased by £13 rather than decrease as I thought it would have considerably.

Thanks

Dazed_and_confused

Perhaps you could enlighten us with details of when your company car was returned and how your 1262(L?) tax code is made up?

Could be as simple as Personal Allowance £12,500 plus say expenses £120 but could equally be millions of other permutations.

So am I right in saying I will be earing 5670 more per year?

Have you had a £5,670 pay rise?

Are you getting £5,670 car allowance (basically extra salary) instead of the company car?

Brewer2000

Hi,
You are correct it is personal allowance and the additional £120

I have received an allowance in place of the car yes and that does come to around £5670

Sounds like that is my answer. ��