Tax code changed in my payslip and now more tax deducted

Messiah9

Hello,

I recently noticed in my payslip that my tax code has changed since last year and now more tax is being deducted. I was notified about it by my employer.

In April 2021, I received a promotion and a salary raise. After that, I was receiving the new monthly salary properly up until July 2021. Starting from Aug 2021, my monthly salary reduced due to higher tax deductions.

I just noticed that this must be happening due to an updated tax code. Aug 2021 onwards, my payslip shows the tax code as: K524 M1 and earlier it was 1244T

I would like to know the following:

Was the tax code changed incorrectly? According to me, it was updated incorrectly because my monthly salary is even lower now than what it was prior to the promotion and salary raise.

calcotti

This is the Welfare Benefits forum. Tax questions are better asked in the Cutting Tax forum.
https://forums.moneysavingexpert.com/categories/cutting-tax

chrisbur

Both tax codes are below the normal personal allowance so HMRC are adjusting your tax code for some reason.  Possibly due to earnings being over £100000 or for some additional taxable benefit or due to some other  taxable income or tax owed from past year.  To start with check your personal tax account to see if that throws any light on it.

https://www.gov.uk/personal-tax-account

Dazed_and_C0nfused

Was the tax code changed incorrectly? According to me, it was updated incorrectly because my monthly salary is even lower now than what it was prior to the promotion and salary raise.

The tax codes mean literally nothing without the breakdown of how they were calculated.  Until you provide that information no one can provide any meaningful help as to whether they are correct or not.

Messiah9

chrisbur said:

Both tax codes are below the normal personal allowance so HMRC are adjusting your tax code for some reason.  Possibly due to earnings being over £100000 or for some additional taxable benefit or due to some other  taxable income or tax owed from past year.  To start with check your personal tax account to see if that throws any light on it.

https://www.gov.uk/personal-tax-account

Thanks. I will check that link for personal tax account details.

My salary composition consists of annual base salary and bonus (which is paid twice an year, every 6 months). Do you know if both of these count towards calculating overall earnings being above £100000?

Its strange I was earning more every month before the salary hike

Messiah9

calcotti said:

This is the Welfare Benefits forum. Tax questions are better asked in the Cutting Tax forum.
https://forums.moneysavingexpert.com/categories/cutting-tax

Thank you. I will ask accordingly.

Robbie64

According to https://www.gov.uk/tax-codes/what-your-tax-code-means:

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.

Employers and pension providers cannot take more than half your pre-tax wages or pension when using a K tax code.

In addition:

If your tax code has ‘W1’ or ‘M1’ or ‘X’ at the end

These are emergency tax codes.

However hopefully you will get further help at the Cutting tax forum. You'll most likely have to phone HMRC to get a fuller explanation but good luck with getting a reply on their helpline within a decent amount of time (a lot of HMRC staff are still working from home).

chrisbur

Robbie64 said:

According to https://www.gov.uk/tax-codes/what-your-tax-code-means:

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.

Employers and pension providers cannot take more than half your pre-tax wages or pension when using a K tax code.

In addition:

If your tax code has ‘W1’ or ‘M1’ or ‘X’ at the end

These are emergency tax codes.

However hopefully you will get further help at the Cutting tax forum. You'll most likely have to phone HMRC to get a fuller explanation but good luck with getting a reply on their helpline within a decent amount of time (a lot of HMRC staff are still working from home).

Unfortunately the .gov site tends to be somewhat over simplified.  The reason for the M1 code in this case has nothing to do with emergency tax codes. If the M1 code had not been used the OP would have had the tax code change back dated to the start of the tax year and then would have paid most of the  tax out of their salary for the next month. This way the extra tax to be taken is split evenly over the remaining paydays in the tax year.  HMRC tend to usually apply a code on a non-cumulative (M1 W1 ) basis when they reduce an employee's tax code.  
Why it was reduced in this case no-one can say without more information from the OP.

born_again

Change of tax code is usually followed by a letter from them explaining why there is a change & a breakdown of the figures.

chrisbur

Messiah9 said:

chrisbur said:

Both tax codes are below the normal personal allowance so HMRC are adjusting your tax code for some reason.  Possibly due to earnings being over £100000 or for some additional taxable benefit or due to some other  taxable income or tax owed from past year.  To start with check your personal tax account to see if that throws any light on it.

https://www.gov.uk/personal-tax-account

Thanks. I will check that link for personal tax account details.

My salary composition consists of annual base salary and bonus (which is paid twice an year, every 6 months). Do you know if both of these count towards calculating overall earnings being above £100000?

Its strange I was earning more every month before the salary hike

All of your taxable income counts towards the £100000 so yes your bonuses will be included.
Your tax codes are just an estimate; your final tax will be decided by your self assessment but HMRC these days do tend to make adjustments as the tax year goes along. I do not know a lot about your situation but the following is an example of what might be happening.
At the start of the tax year on the information HMRC have they issue a tax code.  You then get a pay increase and a bonus and HMRC see that a chunk or possibly all of your tax allowance which you have  been getting is now going to be lost due to your higher earnings.  They adjust your tax code but as this adjustment has to go back to the start of the tax year and they only have three months to collect the extra tax they have to use a code that is not only collecting the extra tax due for the next three months but also the tax under-deducted for the first nine months.
The reason for this change might be something completely different but whatever it is your tax will be calculated at the tax year end and if you have over-paid, that over-payment will be refunded to you.