Tax advice

71peyman71

Hi all.
I was wondering, is there a possibility here to obtain some personal tax advice? My tax situation has become somewhat complicated (at least in my mind) and I don't quite understand it. HMRC don't provide any advice of course neither does my employer, for understandable reasons. I have tried to calculate myself but there are many questions. 
Is there anyone here with some good level of knowledge who may be able to help, mainly about pension contributions and tax reduction?

Thanks 

Dazed_and_C0nfused

Pension contributions can be tricky.  The main reason being that individuals often don't understand which method(s) are being used to contribute.

And unless you know that you cannot possibly understand the tax implications.

The three usual methods are 

Net pay

Relief at source

Salary sacrifice

Net pay and salary sacrifice are pretty straightforward, relief at source is more complicated to understand.

Some people also make gross contributions with no tax relief whatsoever when the payment is made.  These are usually large one-off payments to public sector pension schemes.

If you supply the details it should be possible to get some answers on here.

One important thing to note is you can never make contributions for a tax year that has already ended.

71peyman71

Dazed_and_C0nfused said:

Pension contributions can be tricky.  The main reason being that individuals often don't understand which method(s) are being used to contribute.

And unless you know that you cannot possibly understand the tax implications.

The three usual methods are 

Net pay

Relief at source

Salary sacrifice

Net pay and salary sacrifice are pretty straightforward, relief at source is more complicated to understand.

Some people also make gross contributions with no tax relief whatsoever when the payment is made.  These are usually large one-off payments to public sector pension schemes.

If you supply the details it should be possible to get some answers on here.

One important thing to note is you can never make contributions for a tax year that has already ended.

Thanks. Regarding your last comment, that is exactly what I am beating myself about! I wish I were more financially savvy at least a year ago! Can't change that now unfortunately.

But anyway, I have started a new job and will be able to make contributions to a workplace pension through salary sacrifice from September. I fall in the higher rate tax bracket. I want to know who much I should sacrifice in order to become a basic rate tax payer so that my other non-pensionable benefits get taxed at the lower rate (eg. car allowance). What complicates this is that my income last year was 110k and I now owe HMRC lots of tax which they have started recouping having just changed my tax code. 

Thanks

Dazed_and_C0nfused

I think you are almost certainly confused about your tax code.

HMRC are highly unlikely to have changed your 2022:23 tax code now to collect tax owed for 2021:22.

Tax owed for 2021:22 will either be payable direct to HMRC by 31 January 2023 (when your Self Assessment return must be submitted by).

Or if you file your return by 30 December and owe less than £3,000 (for 2021:22) it could possibly be collected via your 2023:24 tax code.

Any adjustment made to your 2022:23 tax code will be to provisionally collect additional tax for 2022:23, not tax owed from 2021:22.

For higher earners salary sacrifice is usually the most tax efficient and simplest way of getting money into a pension.  But it means you aren't contributing.    You are agreeing to a lower salary in return for additional employer contributions. 

So you miss out on pension tax relief.  But you don't ever need to tell HMRC about the contributions (as they are employer contributions) and you don't include them on a tax return.

The best thing though is you avoid paying tax and national insurance on the amount sacrificed so better overall for pretty much everyone except low earners who wouldn't be paying tax or NI in the forest place.

71peyman71

Dazed_and_C0nfused said:

I think you are almost certainly confused about your tax code.

HMRC are highly unlikely to have changed your 2022:23 tax code now to collect tax owed for 2021:22.

Tax owed for 2021:22 will either be payable direct to HMRC by 31 January 2023 (when your Self Assessment return must be submitted by).

Or if you file your return by 30 December and owe less than £3,000 (for 2021:22) it could possibly be collected via your 2023:24 tax code.

Any adjustment made to your 2022:23 tax code will be to provisionally collect additional tax for 2022:23, not tax owed from 2021:22.

For higher earners salary sacrifice is usually the most tax efficient and simplest way of getting money into a pension.  But it means you aren't contributing.    You are agreeing to a lower salary in return for additional employer contributions. 

So you miss out on pension tax relief.  But you don't ever need to tell HMRC about the contributions (as they are employer contributions) and you don't include them on a tax return.

The best thing though is you avoid paying tax and national insurance on the amount sacrificed so better overall for pretty much everyone except low earners who wouldn't be paying tax or NI in the forest place.

They have definitely started collecting it this year because on my personal HMRC page, my tax free amount is suddenly showing -5906 and my tax code has changed to K589X for my last employer and BRX for my current employer. 
Also, in this month's pay, they have deducted almost twice the tax they have been collecting so far.

It's really confusing. 

Dazed_and_C0nfused

71peyman71 said:

Dazed_and_C0nfused said:

I think you are almost certainly confused about your tax code.

HMRC are highly unlikely to have changed your 2022:23 tax code now to collect tax owed for 2021:22.

Tax owed for 2021:22 will either be payable direct to HMRC by 31 January 2023 (when your Self Assessment return must be submitted by).

Or if you file your return by 30 December and owe less than £3,000 (for 2021:22) it could possibly be collected via your 2023:24 tax code.

Any adjustment made to your 2022:23 tax code will be to provisionally collect additional tax for 2022:23, not tax owed from 2021:22.

For higher earners salary sacrifice is usually the most tax efficient and simplest way of getting money into a pension.  But it means you aren't contributing.    You are agreeing to a lower salary in return for additional employer contributions. 

So you miss out on pension tax relief.  But you don't ever need to tell HMRC about the contributions (as they are employer contributions) and you don't include them on a tax return.

The best thing though is you avoid paying tax and national insurance on the amount sacrificed so better overall for pretty much everyone except low earners who wouldn't be paying tax or NI in the forest place.

They have definitely started collecting it this year because on my personal HMRC page, my tax free amount is suddenly showing -5906 and my tax code has changed to K589X for my last employer and BRX for my current employer. 
Also, in this month's pay, they have deducted almost twice the tax they have been collecting so far.

It's really confusing. 

There is nothing you have posted which suggests tax owed from 2021:22 is being collected 

It's much much more likely that they have adjusted your current tax code to collect extra tax for this tax year only.

But you have a different issue.  Did you get a P45 from your last employer?  If no why not?

If you did have you handed it to your new employer?

From what you have posted tax code BR, even on a non cumulative basis (that's what the X signifies) means you are almost certainly building up even more tax arrears.

71peyman71

Dazed_and_C0nfused said:

71peyman71 said:

Dazed_and_C0nfused said:

I think you are almost certainly confused about your tax code.

HMRC are highly unlikely to have changed your 2022:23 tax code now to collect tax owed for 2021:22.

Tax owed for 2021:22 will either be payable direct to HMRC by 31 January 2023 (when your Self Assessment return must be submitted by).

Or if you file your return by 30 December and owe less than £3,000 (for 2021:22) it could possibly be collected via your 2023:24 tax code.

Any adjustment made to your 2022:23 tax code will be to provisionally collect additional tax for 2022:23, not tax owed from 2021:22.

For higher earners salary sacrifice is usually the most tax efficient and simplest way of getting money into a pension.  But it means you aren't contributing.    You are agreeing to a lower salary in return for additional employer contributions. 

So you miss out on pension tax relief.  But you don't ever need to tell HMRC about the contributions (as they are employer contributions) and you don't include them on a tax return.

The best thing though is you avoid paying tax and national insurance on the amount sacrificed so better overall for pretty much everyone except low earners who wouldn't be paying tax or NI in the forest place.

They have definitely started collecting it this year because on my personal HMRC page, my tax free amount is suddenly showing -5906 and my tax code has changed to K589X for my last employer and BRX for my current employer. 
Also, in this month's pay, they have deducted almost twice the tax they have been collecting so far.

It's really confusing. 

There is nothing you have posted which suggests tax owed from 2021:22 is being collected 

It's much much more likely that they have adjusted your current tax code to collect extra tax for this tax year only.

But you have a different issue.  Did you get a P45 from your last employer?  If no why not?

If you did have you handed it to your new employer?

From what you have posted tax code BR, even on a non cumulative basis (that's what the X signifies) means you are almost certainly building up even more tax arrears.

I don't understand how I am going into more arrears if I have just paid 1k more in tax than every month before. They are collecting extra tax.

I almost want to stop working all together! 

Dazed_and_C0nfused

BR = basic rate tax.  So as a high earner you won't be paying enough.

Was the extra deducted by the old employer?

71peyman71

Dazed_and_C0nfused said:

BR = basic rate tax.  So as a high earner you won't be paying enough.

Was the extra deducted by the old employer?

I don't know. There is a Tax (Code 0T M1) in my payslip under deductions. I guess it means I have no tax free personal allowance. But why? Since April, I haven't earned anywhere near as much. 

Dazed_and_C0nfused

Possibly for a payment after your final normal payday?

Assuming its the old employer.

You really need to look at the whole picture and it can be protracted pulling out information pice by piece on forums like this.

sheramber

As you earned over £100k your personal allowance is restricted, hence the underpayment.

https://www.gov.uk/income-tax-rates/income-over-100000

Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above.

You’ll also need to do a Self Assessment tax return.

HMRC work on the assumption that you will earn a similar amount this year so your code number will include a restriction for 
the anticipated extra tax due.

You say you are not earning as much now.  Do you have an accurate estimate of your income and all benefits  for 22/23?

Perhaps you would benefit from consulting a tax adviser.