TAX code incorrect, what do we do next ?

Dazed_and_C0nfused

traceyaj said:

Thanks for the replies. 
The codes are broken down as follows:- from local govt. pension £1266 is tax free, current employment £615 tax free, HL £0 income tax free,  codes are pension fund £126M X, employment 61T, HL BR. His gross monthly pension is approx. £1140 per month, employment is £898 per month, no other income, savings mostly in ISAs.  

You'll need to give the full breakdown of how the 126M code has been calculated in that case.

There will presumably be a deduction of 615 for the allowances allocated to the employment but there must be other elements as well to reduce tax code allowances of ~13900 down to just 1266.

Was the only HL pension withdrawal £7,500 with £1,500 tax being deducted by HL?

traceyaj

 I really don't know how the 126M has been calculated. The only HL pension withdrawal was £8500 . HL paid £1500 tax. On the back of the letter it states under note 9 estimated tax you owe (this year) :-
 "Due to an in year adjustment to your tax codes we think that you will owe HMRC £1402.40. we will therefore include an adjustment to reduce your tax free allowance to collect the £1402.40 in equal instalments by increasing the tax deducted from your wage, salary or pension from 6th April 2023."
He is going to ring the tax office around 8 a.m. 

Dazed_and_C0nfused

traceyaj said:

 I really don't know how the 126M has been calculated. The only HL pension withdrawal was £8500 . HL paid £1500 tax. On the back of the letter it states under note 9 estimated tax you owe (this year) :-
 "Due to an in year adjustment to your tax codes we think that you will owe HMRC £1402.40. we will therefore include an adjustment to reduce your tax free allowance to collect the £1402.40 in equal instalments by increasing the tax deducted from your wage, salary or pension from 6th April 2023."
He is going to ring the tax office around 8 a.m. 

If you know about the £1402.40 then you must know how the 126M has been calculated.

It would be something like

Personal Allowance 12570 + Marriage Allowance 1260 + expenses 60 = 13890 tax code allowances

Less

Allowances given to another PAYE source (the employment) 615 + underpayment deduction 12010 (to collect the 1402.40 between now and 5 April) = 12625

13890 - 12625 = 1265 final tax code allowances = tax code 126M.

The key thing here is why there is an underpayment calculated for the current tax year?

Was he getting two lots of Personal Allowance for a while i.e. tax codes say 1389M at the pension and 1257L at the job?

If so the tax owed could be correct.

Also, I would suggest getting your figures correct for the HL SIPP income, if it's £7,500 with tax deducted £1,500 then that's all you need to mention, not any TFLS aspect. 

traceyaj

Update on this. Just come off the phone and they say that he will get a new letter and that that they have put the codes back to what they were. They said they could do this as they have now received a P45 from Hargreaves Lansdown.