Tax code 19/20

malipha

Hi,
I've had a letter from the HMRC telling me my tax code for next year, but I don't understand it.
This year I have earned a total of £23,000 with a tax code of S1185L. I have two jobs, with my tax allowance being applied on my first job, and my second job being fully taxed (it only brings in £1,300 a year). This is what has happened in previous years also.
Next year my earnings will be around the same. My tax code is S1245L, with an explanation that I have a £49 reduction on my personal allowance as they estimate that my second job should have a higher rate of tax applied to it. They have also estimated that I will need to pay an extra £654 in tax.
We do have around £10,000 in a savings account, which should be paid against our mortgage soon. I think the interest rate on it, is fairly minimal though.
Would this extra be because I live in Scotland, or is there a mistake somewhere? It's already hard enough to make ends meet, so this is scaring me a wee bit.
Thanks
Mali

agrinnall

I would suspect that your total income is tipping your marginal rate from Basic Rate (20%) to Intermediate Rate (21%), which happens at £24,000. Best option is to ring HMRC and ask them to explain it to you, as that gives you an opportunity to correct any assumptions they may have made wrongly.


https://www.gov.uk/scottish-income-tax

malipha

Thanks for that. Would a change from tax band not just result in a bit more tax being paid on the extra income though, rather than a deduction from the personal allowance? I need to get everything clear in my head before I try to phone them again!

BoGoF

You can blame the Scottish Government for the complication. I'm assuming basic rate is in operation at your 2nd job which can only collect 20% but as you have tipped into the 21% the adjustment needs to be made at your main job

Linton

malipha wrote: »

Thanks for that. Would a change from tax band not just result in a bit more tax being paid on the extra income though, rather than a deduction from the personal allowance? I need to get everything clear in my head before I try to phone them again!

The extra tax comes from the total of both your jobs. But neither jobs payroll system knows about the other job so neither see you cross the boundary.

Dazed_and_confused

My tax code is S1245L, with an explanation that I have a £49 reduction on my personal allowance as they estimate that my second job should have a higher rate of tax applied to it. They have also estimated that I will need to pay an extra £654 in tax.

This doesn't make sense. A tax code reduction of £49 would result in about £10 extra tax being paid (49 x 20%).

This type of adjustment isn't an exact science and you may end up overpaying or underpaying tax if the income at either job end up being different to the estimates HMRC have used for each job when calculating the tax code for 2019:20.

An alternative, which should help ensure you don't owe any tax is to have tax code SD0 allocated to the second job so you pay 21% tax on all the taxable wage from that job.

If you have any unused basic rate band left over from the main job at the end of the tax year you might be due a small amount of tax back from the second job (HMRC will automatically refund this when they review things after the end of the tax year).