K tax code

gthe

Hello,

I am new to the UK tax system and first time i have entered a K tax code this month. I have a single job, no benefits, no other income. My annual income is estimated by my company for this year around 115K (although it may end up lower based on the company's stock prices). Used to be in 1250L code and i moved to K75 M1 code this month.

I guess this is because of the 15K income over the 100K that reduces my personal allowance from 12500 to 5000 (if my calculations are correct). Does this mean that i have to pay additional tax of 20% x 7500 = 1500 if i end up to earn 115K?

I visited my HMRC tax account and checked the figures, but it is not clear to me how they end up to the "75" part of the K code. And if this is a one-time correction for a single month or a correction for every month till the end of the financial year. This month they just increased the tax by 450, so a bit confused how they will end up to get the needed tax.

Read also some posts that i can contribute some money (the over 100K) to the Pension scheme to recover my personal allowance but not very clear to me how to do the figures to see if it is worthing.

unholyangel

K code means you're being taxed on more income than you're actually receiving. Its a negative tax free allowance.

This will be because your personal allowance has reduced. Meaning that not only will you be required to pay more tax going forward, but also that you underpaid for the months you were on the 1250L code by around £250 per month. So there will be a further reduction to your tax code to try collect some/all of this during the current tax year.

Its also 40% on the extra, not 20%. The reduction in personal allowance reduces the amount you pay at 0%, it doesn't increase the basic rate band.