Next tax year estimated taxable income from employment

adriandilly

Checked my tax account and my estimated taxable income for next year (from April 2022) has gone up. Does my employer provide this or is it calculated from the current year (I've done a fair bit of overtime this year)? 

Thanks in advance

Dazed_and_C0nfused

It's usually calculated using information supplied by your employer for the current tax year.

For example if your taxable pay after 9 months of the current tax year was £27,000 HMRC would estimate your taxable pay for 2022:23 as £36,000.

27,000 ÷ 9 = 3,000
3,000 x 12 = 36,000

At the end of the day it's simply an educated estimate.  If you think a different figure will be more realistic then you can change it on your Personal Tax Account. 

But for a lot of people it won't actually have any impact on their tax code.

FatherTireseus

D_A_C sums it up nicely,  but to add my two cents.....

Having taken a single lump sum payment from my pension (over and above the tax free lump sum) in one month this tax year, HMRC's computer system decided I was taking that amount every single month next year.

The amount they had assumed I was taking in 2022/23 is more than the total remaining in that pension fund (luckily it's not my only pension).  This had a fairly eye-watering effect on my 2022/23 tax code, but I have amended it in my tax account online.

My feeling is that HMRC systems are really geared around people being paid consistent amounts on a regular basis.  They don't seem to cope that well with fluctuating amounts when it comes future projections.  But to be fair,  if you're working overtime HMRC won't know it's overtime,  it's just your total income that gets reported to them by your employer.  So that's what they use when coming up future estimates for tax code purposes. 

Dazed_and_C0nfused

My feeling is that HMRC systems are really geared around people being paid consistent amounts on a regular basis.  

I thought no it's more that they are based on past history i.e. what an employer or pension payer has actually paid.

I don't think pension companies have to report how much is left in a (DC) pension fund and even if they did investment returns/losses would change that on a daily basis for most people.

At the end of the day it's an estimate and people have the ability to change it if they can supply a more accurate figure.

adriandilly

Dazed_and_C0nfused said:

It's usually calculated using information supplied by your employer for the current tax year.

For example if your taxable pay after 9 months of the current tax year was £27,000 HMRC would estimate your taxable pay for 2022:23 as £36,000.

27,000 ÷ 9 = 3,000
3,000 x 12 = 36,000

At the end of the day it's simply an educated estimate.  If you think a different figure will be more realistic then you can change it on your Personal Tax Account. 

But for a lot of people it won't actually have any impact on their tax code.

This is what I suspected but whichever way I try to calculate it, I always end up with a figure a fair bit different to their estimate. I was wondering if there's a known algorithm they use. You would think taxable year-to-date alone would be the best predictor. 

Dazed_and_C0nfused

The information here is the best I can find.

The bit for next tax year is about half way down.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye13090

Thrugelmir

FatherTireseus said:

My feeling is that HMRC systems are really geared around people being paid consistent amounts on a regular basis.  They don't seem to cope that well with fluctuating amounts when it comes future projections.  But to be fair,  if you're working overtime HMRC won't know it's overtime,  it's just your total income that gets reported to them by your employer.  So that's what they use when coming up future estimates for tax code purposes. 

Easy now to log onto your personal tax account and amend the figure. Totally hassle free. At least people will no longer receive unexpectedly large tax bills if they bother to update their own record.