New tax code for 787lx starting jan 2019

HUMBUG

Just signed into my HMRC online account after receiving an email saying my tax code has changed .

It used to be 1185L but now its changed to 787LX ?

After googling for more info the X is some non-cumulative code (whatever that means).

On MSE website it states the following:

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When will my tax code change?

HMRC has now finished sending out 2018/19 tax codes. Some will have seen their tax code is lower than the standard 1185L, as HMRC already expects they will earn more in savings interest than their personal savings allowance covers.

If this has happened to you, and you won't earn more than £1,000 in savings interest (£500 for higher-rate taxpayers), contact HMRC as they will need to adjust your 2018/19 tax code to be correct. You can call it on 0300 200 3300 or use its 2018/19 tax-code query form.

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So I get 9.5k approx from my previous employer pension scheme . This is the only non-savings income I get . But they have obviously received 'saving interest/ Share Income & dividend payments' information from the 'banks/building socs/share-dealing platforms' and estimated that my savings income will be greater than the £1k personal savings allowance for this financial year.

So is this the reason for the tax code change?

But now I'm very confused because isn't there also a 'starting savings rate' of £5k at 0% tax rate (for anyone earning non-saving income less than the 11850 + 5000 =£16185)?

So for my personal situation I am earning a non-saving income of 9.5k which is less than the £16185 upper limit mentioned above. Do I now qualify for a 5k starting savings rate at 0%?

So unless I have got this completely wrong I can have a tax free allowance on any combined 'non savings/savings' income as follows:

1. 11850 (Tax free personal allowance) - 9500 (Pension) = £2350
2. 5000 (savings starting rate at 0%) + 1000 (personal savings allowance at 0%) = £6000
3. Dividend Allowance = £5000

So shouldn't I be allowed to have tax free savings up to £(2350+6000)= £8350

Plus

Tax free Dividends on shares up to £5000

Have I worked this out correctly?

Dazed_and_confused

Details of the make up of your rax code would help.

But you are broadly on the right lines with your understanding.

There is no £1,000 allowance though, it is another 0% rate band. Which comes after the £5,000 savings one.

HUMBUG

Dazed_and_confused wrote: »

Details of the make up of your rax code would help.

But you are broadly on the right lines with your understanding.

There is no £1,000 allowance though, it is another 0% rate band. Which comes after the £5,000 savings one.

Many thanks . I must admit I only found out about this '5k savings starting rate at 0% ' by chance yesterday while googling for tax code explanations. Is this something new that has just been introduced?

I don't recall it being mentioned on MSE site before.

Addendum: Just logged into my HMRC account and it just looks wrong. For some reason they have said the following:

Your total income from private pension is estimated at £24,248 this tax year

I only get £9.5k pension and that was my pension income last year April 17 -April 18

Wonder how they came up with that estimate? By doing the above that means I go above the upper limit of that 5k savings start rate 0% . Now they are going to tax my £9.5k pension on some non-cumulative monthly basis using that X code (I think).

Phone them up and get an automated message saying they are too busy and to phone again next week . Need to send a letter I think as no means of secure messaging within my online account.

Dazed_and_confused

Is this something new that has just been introduced?

No, it's been around a lot longer than the savings nil rate (PSA). It started as a 10% rate I think but has been 0% for a few years now.

By doing the above that means I go above the upper limit of that 5k savings start rate 0% .

Yes, you would lose all of the savings starter rate and just get the nil rate.

I think you might be able to update the private pension figure on your personal tax account and that should prompt a new, more accurate, tax code to be issued.

HUMBUG

Dazed_and_confused wrote: »

No, it's been around a lot longer than the savings nil rate (PSA). It started as a 10% rate I think but has been 0% for a few years now.



Yes, you would lose all of the savings starter rate and just get the nil rate.

I think you might be able to update the private pension figure on your personal tax account and that should prompt a new, more accurate, tax code to be issued.

When I click 'View Pension Details' link it shows my old employee pension value as £9786 - its correct!

But on the right hand side of the screen it has a section called 'Annual Amounts' . Underneath there is 'Your Estimated Income Tax' (for 6 April 18- 5 April 19) showing an amount of £795.

I then click on 'How Your Income Tax is calculated' and its says your 'Total Estimated Income ' is £24248.

Then click on 'View Detailed Income Tax estimate' and it says 'total income tax estimate ' £795 .

Underneath it then says

Tax on your private pension income

Your total income from private pension is estimated at £24,248 this tax year. You have a tax-free amount for your private pension income. This means the first £11,850 of your private pension earnings are tax free.

So it looks like they have my old employee annual pension figures correct but must be thinking I am getting income from some other source. The extra private pension income they've estimated is 24248 - 9786 =£14162

I'm dumbfounded about how they estimated this extra private pension . I do have a drawdown pension but do not draw out any payments (just keep any dividend income reinvested). Anyhow, wouldn't dividends in the drawdown be covered by the shares dividend allowance of £5000 at 0% rate?

Doesn't look right to me.

Dazed_and_confused

There is no "allowance" for dividends, it is a 0% tax rate like the Personal Savings Allowance is (and is now £2,000 not £5,000).

Anyhow sounds like you are probably best phoning HMRC and getting them to update your estimated income. Maybe they think you have two pensions (one the drawdown) and you just need to provide more accurate figures of the income you will have in this tax year (£9,786 and £0?).

HUMBUG

Dazed_and_confused wrote: »

There is no "allowance" for dividends, it is a 0% tax rate like the Personal Savings Allowance is (and is now £2,000 not £5,000).

Anyhow sounds like you are probably best phoning HMRC and getting them to update your estimated income. Maybe they think you have two pensions (one the drawdown) and you just need to provide more accurate figures of the income you will have in this tax year (£9,786 and £0?).

That's a shame about the dividend 0% tax rate being reduced. 'Which' seems to thinks its some kind of allowance (just terminology I guess).

https://www.which.co.uk/money/tax/income-tax/income-tax-on-savings-and-investments/dividend-tax-calculator-201920-a30cd5g61pvk

I think I'll write to HMRC because even if they thought I had a drawdown pension , it should be included on my online account.

I think they've somehow used previous years 'income' when I was getting staged redundancy payments from my old employer (ie. around 13k per year for 3 years). Those payments stopped over 2 years ago.

sparkiemalarkie

HMRC online really isn't working at all well.


I have had a problem with some random amount that was showing as income.
I have contacted the office twice today and have finally got the amount removed,
My estimated income from savings has now been deducted from my personal allowance and reduced my allowance from £11850 to £11,520 pa
It's a mess
I strongly suggest that you try to sort your problem asap so that you can hopefully get it right before April.


I phoned twice today and got through quite quickly


sparkie

Dazed_and_confused

My estimated income from savings has now been deducted from my personal allowance and reduced my allowance from £11850 to £11,520 pa

I think you are getting your tax code and your Personal Allowance mixed up. Your Personal Allowance would only be reduced if you had income over £100k or had applied for Marriage Allowance.

Reducing your tax code to account for taxable savings interest is quite normal and usually happens for one of two reasons, you need to pay extra tax as a result of the interest income or you don't earn enough to pay tax with the company using the tax code.