Splitting the tax code

fly-catchers

Since I left my job last year I have been receiving two pensions from my old employment. Until the new tax year they gave the full personal allowance to the bigger pension and left the much smaller one on BR. My personal allowance still included a clothing allowance of 
£120 from my job. I went online and removed it from the date I left. However it has only just be removed from my allowance yesterday. Before this occurred they had already split the personal allowance over my two pensions. If you added the two amounts together it was £10 less than the full allowance including my clothing allowance. Now they have adjusted it to £12570 it is shown as 1190L and 66T.  But that is still £10 less or is that how they do it? They do correctly show the personal allowance as £12570 with £75 as the estimated tax which is correct.

molerat

1190 gives a tax free amount of £11909.16 and 66 gives £668.40 which is £12577.56. When tax codes are split they often do drop 1 point so that the £9 ish extra the system adds when using the code is not duplicated.

Albermarle

 Before this occurred they had already split the personal allowance over my two pensions. 

Out of interest, why did they split it ? I would have thought the first way of allocating all the allowance to one pension ( assuming it is big enough) would be simpler?

t0rt0ise

Albermarle said:

 Before this occurred they had already split the personal allowance over my two pensions. 

Out of interest, why did they split it ? I would have thought the first way of allocating all the allowance to one pension ( assuming it is big enough) would be simpler?

They always seem to do odd things. I have three work pensions, two of which are tiny, but they split the tax code weirdly over those two instead of just using the one larger pension. One is BR and the other is a K code which means I don't understand how to check it. But whatever, they don't like to make things simple.

JoeCrystal

t0rt0ise said:

They always seem to do odd things. I have three work pensions, two of which are tiny, but they split the tax code weirdly over those two instead of just using the one larger pension. One is BR and the other is a K code which means I don't understand how to check it. But whatever, they don't like to make things simple.

You should be able to know what your tax codes are. Otherwise, how you meant to tell if HMRC got something wrong.

According to the HMRC site (https://www.gov.uk/tax-codes), it is as follows:

If your tax code has a ‘K’ at the beginning

Tax codes with ‘K’ at the beginning mean you have income that is not being taxed another way and it’s worth more than your tax-free allowance.

For most people, this happens when you’re:

• paying tax you owe from a previous year through your wages or pension

• getting benefits you need to pay tax on - these can be state benefits or company benefits

Your employer or pension provider takes the tax due on the income that has not been taxed from your wages or pension - even if another organisation is paying the untaxed income to you.

fly-catchers

Mine is L & T

femalemonarchfemalecanine

so long as it is correct overall, you can have your allowance split however you want

Albermarle

femalemonarchfemalecanine said:

so long as it is correct overall, you can have your allowance split however you want

Yes , but it seems it is sometimes split unnecessarily , even if you are happy to have all the allowance with one one income stream.

badmemory

You need to watch what income the K code is set against.  It is a funny animal.  If it is set against a small income then the tax it can take is also small.  If the income it is on is only £100 then the max tax they can take (which is half) is £50.  If the income is £1000 then the max is £500.  It may not be that much but you can use that to check if that would be around the right deduction.  For example I had a rather large K code to set against an income of only £2000.  That meant the payer could only deduct £1000 which wasn't enough.  I (eventually) got a bill as expected from HMRC.

It always amuses me that just when you retire & are hoping life will get easier, HMRC seem to go out of their way to make it more difficult, which includes not allowing you to do self assessment.  The new simple assessment which they do themselves is a misnomer, I'm just looking forward to receiving one which is correct.

t0rt0ise

badmemory said:

You need to watch what income the K code is set against.  It is a funny animal.  If it is set against a small income then the tax it can take is also small.  If the income it is on is only £100 then the max tax they can take (which is half) is £50.  If the income is £1000 then the max is £500.  It may not be that much but you can use that to check if that would be around the right deduction.  For example I had a rather large K code to set against an income of only £2000.  That meant the payer could only deduct £1000 which wasn't enough.  I (eventually) got a bill as expected from HMRC.

It always amuses me that just when you retire & are hoping life will get easier, HMRC seem to go out of their way to make it more difficult, which includes not allowing you to do self assessment.  The new simple assessment which they do themselves is a misnomer, I'm just looking forward to receiving one which is correct.

That's useful to know. I know I'm going to pay too much tax over the year because they are guessing how much interest I'll get on savings. They haven't yet done anything about tax for last year and the year before (they will be nil tax) so are judging my interest amount on 2018/19 year which was higher than now. My spreadsheet will be useful this year.

SouthCoastBoy

badmemory said:

You need to watch what income the K code is set against.  It is a funny animal.  If it is set against a small income then the tax it can take is also small.  If the income it is on is only £100 then the max tax they can take (which is half) is £50.  If the income is £1000 then the max is £500.  It may not be that much but you can use that to check if that would be around the right deduction.  For example I had a rather large K code to set against an income of only £2000.  That meant the payer could only deduct £1000 which wasn't enough.  I (eventually) got a bill as expected from HMRC.

It always amuses me that just when you retire & are hoping life will get easier, HMRC seem to go out of their way to make it more difficult, which includes not allowing you to do self assessment.  The new simple assessment which they do themselves is a misnomer, I'm just looking forward to receiving one which is correct.

I wasn't aware HMRC don't let you do a self assessment once you are retired?