Appear to have been over-taxed after salary increase - Month 1 tax code or something esle? 25 August 2022 at 1:27PM edited 25 August 2022 at 1:32PM in Cutting tax 24 replies 382 views

Da_Crojanz

I got a salary increase in July which was backdated to February so the payslip I have just received in August is the first standard one on my new salary. Net pay was a bit less than I expected so I went through it and compared to an online salary calculator to compare. Usually this calculator is correct to within a couple of pounds or 2 and it has been in multiple jobs I've had, but this time it's saying I've been over-taxed around £60.

The net pay increase for a £3.5k raise is only coming in around £110 a month so I'm sure there is something up and on further inspection it appears that it's a Month 1 tax code. Could this be the cause and if so will it eventually rectify? I've looked up  Month1codes and how they work and it doesn't seem to indicate that it's responsible but I may be missing something. Could the larger pay packet I received in July with backdated salary have thrown things off?

molerat

Have you had the M1 code all this FY ?

What does your on line tax account show for your tax code and how it was arrived at ?

Da_Crojanz

No M1 this month only. I was on 1111L and it's now 1058L. The difference is due to private healthcare but the code shouldn't. result in a £60 tax increase per month (online calculators suggest it should be about £17).

The calculator I used got all other deductions right down to the penny more or less, but  I was taxed £60 more.

molerat

If the healthcare has been in place and not accounted for since the beginning of the year then you will owe the back tax on that, owing in year back tax is often the cause of an M1 code being allocated so that it doesn't grab that tax in one go.  You need to work out your total income expected for the year and calculate the tax due on that and compare it to the tax collected so far and what will be deducted going forward and compare the two.  Tax calculators often trip up with changing income and benefits mid year.

Dazed_and_C0nfused

Maybe there had been a bit of 40% tax deducted when the back paid salary was paid and the w1/m1 basis is preventing that from now being adjusted.

Follow @molerat's suggestion and put the info into a calculator on a cumulative basis to see if you would better off insisting HMRC recalculate the code on a cumulative basis.

Da_Crojanz

The issue isn't that the code is wrong it's more that the tax being charged is more than the code suggests it would be (according to salary calculators which I know aren't infallible but are correct almost to the penny on everything else and haven't done me wrong before).

I got a letter to say the switch to 1058L code was due to the health insurance and it gave me a total on extra tax I'd owe for the year which was under £100 (would need to dig out the letter). According to calculators that code means I should pay £620 a month tax on my salary but I pay £680.

Thanks for all the replies, will require some number crunching! I know you can input information on this kind of thing on government gateway, would that help or just muddy the waters further?

MalMonroe

Hi, yes, you could try going onto the government site and logging into your own account there. I've found that really helpful on a number of occasions and you can also ask questions on there and they seem to respond quickly. Income tax is, for me anyway, very complex and sometimes we don't always understand everything so it's really worth a try. (After all, if it's not your job, why would you be expected to know everything about it?)

I don't think it will muddy the waters. I'm retired and every year I'm allocated an incorrect tax code which means I pay some tax - even though my personal online account always advises that my income isn't high enough for me to be taxed. (But I'm okay, honestly!) 

Every year I go onto the site to let them know that they have allocated the wrong code and are making me pay tax again. And every year they adjust the code and then the tax they've taken is refunded via my private pension very quickly. It's not dragged out and although it's a bit annoying that they still do this to me, it's very easily and quickly sorted. 

So I'd say yes, do give it a go. Ask questions on there, that's what it's there for. And they do answer. 

Dazed_and_C0nfused

Da_Crojanz said:

The issue isn't that the code is wrong it's more that the tax being charged is more than the code suggests it would be (according to salary calculators which I know aren't infallible but are correct almost to the penny on everything else and haven't done me wrong before).

I got a letter to say the switch to 1058L code was due to the health insurance and it gave me a total on extra tax I'd owe for the year which was under £100 (would need to dig out the letter). According to calculators that code means I should pay £620 a month tax on my salary but I pay £680.

Thanks for all the replies, will require some number crunching! I know you can input information on this kind of thing on government gateway, would that help or just muddy the waters further?

Have you applied the week1/month1 basis when using the calculators?

If not you won't have got the correct answer.

This is a simple but accurate calculator and you can do a single pay day on it using the week1/month1 option.

http://payecalculator.hmrc.gov.uk/PAYE0.aspx

Da_Crojanz

Dazed_and_C0nfused said:

Da_Crojanz said:

The issue isn't that the code is wrong it's more that the tax being charged is more than the code suggests it would be (according to salary calculators which I know aren't infallible but are correct almost to the penny on everything else and haven't done me wrong before).

I got a letter to say the switch to 1058L code was due to the health insurance and it gave me a total on extra tax I'd owe for the year which was under £100 (would need to dig out the letter). According to calculators that code means I should pay £620 a month tax on my salary but I pay £680.

Thanks for all the replies, will require some number crunching! I know you can input information on this kind of thing on government gateway, would that help or just muddy the waters further?

Have you applied the week1/month1 basis when using the calculators?

If not you won't have got the correct answer.

This is a simple but accurate calculator and you can do a single pay day on it using the week1/month1 option.

http://payecalculator.hmrc.gov.uk/PAYE0.aspx

When I applied that it actually had me paying even less tax than the online calculators, though I didn't understand the question "previous tax not deducted due to regulatory limit".

The plot thickens though - went through my payslips and not only does my tax code seem to change almost monthly, but it is also on M1 most months. This is a terrible mess really, glad I've finally clicked.

I think a mix of the healthcare, pay rises in February and bonuses is causing it.

molerat

though I didn't understand the question "previous tax not deducted due to regulatory limit".

They cannot deduct more than 50% of your pay so if that was the case you would have an underpayment amount to put in that box.

Da_Crojanz

molerat said:

though I didn't understand the question "previous tax not deducted due to regulatory limit".

They cannot deduct more than 50% of your pay so if that was the case you would have an underpayment amount to put in that box.

Googled similar issues on the forum and saw you'd replied on a few - I think for whatever reason I'm ending up on M1 almost all the time and have been for several years. I take it I can only get anything back for this year or can I claim for previous years?