Tax Codes 2023

DE_612183

Hoping someone can advise - don't think it's much use trying to get through to HMRC.

Just had my tax codes for 2023 and have the following:

Employer or pension Current tax year ends 5 April 2023 Next tax year from 6 April 2023
Main Job                                                     C585T           CBR
PENSION                                                    C714L           CK6344

I know that CBR means no tax free portion but the 6344 means that I don't get the full allowance?

chrisbur

DE_612183 said:

Hoping someone can advise - don't think it's much use trying to get through to HMRC.

Just had my tax codes for 2023 and have the following:

Employer or pension Current tax year ends 5 April 2023 Next tax year from 6 April 2023
Main Job                                                     C585T           CBR
PENSION                                                    C714L           CK6344

I know that CBR means no tax free portion but the 6344 means that I don't get the full allowance?

Means a bit more than that, a K code is the reverse of a normal code, £6344 is added to your gross to work out the tax due.  there is a maximum tax it can take of 50% of your gross.
These codes are a massive change from this year, on the notice should be a calculation to show how they are arrived at if you can give these details may make more sense.
Are you going to get state pension next year or any other source of income,
Edit  I see no state pension looking back so forget that

Jeremy535897

The C at the beginning is Wales. A K code is used where you have other untaxed income that the code is being used to collect, so the bigger the number, the more tax is deducted. You multiply it by 10 to see what the untaxed income is. The number you quote is impossibly big as it implies untaxed income of £63,440. See:
https://goselfemployed.co/tax-code-k/

The reason for a K code could be that you have underpaid tax in previous years, or you now get a state pension above the personal allowance.

DE_612183

I've been working for an umbrella company for 2022/23, but have been paying tax for the amount required ( as far as I'm aware ).

What figures do you need to work out if it's right or not?

My last payslip states:

gross pay YTD 114087
tax paid YTD 36672

chrisbur

DE_612183 said:

I've been working for an umbrella company for 2022/23, but have been paying tax for the amount required ( as far as I'm aware ).

What figures do you need to work out if it's right or not?

My last payslip states:

gross pay YTD 114087
tax paid YTD 36672

I would guess that this could have something to do with you going over the £100000 and loosing some/all of the personal allowance.  The explanation on the tax code notice should explain this if it is the case, can you advise the details of the calculation.
Just to check it is CK6344 not CK634

DE_612183

I've nothing in the post - just an email from the main job employer telling me the tax code has changed.

And yes it is CK6344 ( do you think thats a type and should be CK634 )?

Jeremy535897

The codes are most odd. CBR is a wholly inadequate code for your main job, because while it deals with the loss of personal allowance, it ignores the fact that you will be due to pay higher rate tax on the income above £37,700, and additional rate tax above £125,140. For example, if your pay next year turns out to be £125,140, and your pension is £7,500 (I am totally guessing this), you will pay tax as follows:
£37,700 at 20% = £7,540 plus £87,440 at 40% = £34,976 plus £7,500 at 45% = £3,375, totalling £45,891. Applying BR to £125,140 gives £25,028, leaving £20,863 to be collected from a pension of £7,500! What are your pension and salary likely to be next year?

chrisbur

I would recommend that you check out your personal tax account here to see what is going on.
https://www.gov.uk/personal-tax-account

Just noticed that the BR code is for your main job which you say had a gross of £114087 last year and code of 585T  On those sort of earnings BR is going to under-tax you.
Check these code on your tax account and if you could then give an estimate of your pension and pay for next year can see what affect they have.

DE_612183

Jeremy535897 said:

The codes are most odd. CBR is a wholly inadequate code for your main job, because while it deals with the loss of personal allowance, it ignores the fact that you will be due to pay higher rate tax on the income above £37,700, and additional rate tax above £125,140. For example, if your pay next year turns out to be £125,140, and your pension is £7,500 (I am totally guessing this), you will pay tax as follows:
£37,700 at 20% = £7,540 plus £87,440 at 40% = £34,976 plus £7,500 at 45% = £3,375, totalling £45,891. Applying BR to £125,140 gives £25,028, leaving £20,863 to be collected from a pension of £7,500! What are your pension and salary likely to be next year?

Much similar to this year - 120k main job, about 8.5k pension

Dazed_and_C0nfused

Jeremy535897 said:

The codes are most odd. CBR is a wholly inadequate code for your main job, because while it deals with the loss of personal allowance, it ignores the fact that you will be due to pay higher rate tax on the income above £125,140. For example, if your pay next year turns out to be £125,140, and your pension is £7,500 (I am totally guessing this), you will pay tax as follows:
£37,700 at 20% = £7,540 plus £87,440 at 40% = £34,976 plus £7,500 at 45% = £3,375, totalling £. Applying BR to £125,140 gives £25,028, leaving £20,863 to be collected from a pension of £7,500! What are your pension and salary likely to be next year?

It will only be CBR because HMRC's choice of main job/source differs to what the op's view is.

Current year codes are C714L and C585T.

A T code would only ever be the main source in HMRC's eyes if there wasn't also an L code.  The fact that there is an L code shows that the pension (C714L) is the "main" source in HMRC's eyes.  With some tax code allowances then being allocated to the other PAYE source, what the op views as their "main job".

The large K code for the current tax year is likely to be down to an extremely large "adjustment to rate band" deduction.  This is needed where higher rate tax is payable but not at the main source (in HMRC's eyes) so a CD0 code cannot be issued to the other source as 40% tax isn't due on all of the income at the other source.

Personally I think the op should wait till later in March then phone HMRC and ask for the job and pension to be swapped round with effect from 6 April 2023, that will make things easier to understand for the lay person.

But I wouldn't try and change anything now for the current tax year, any tax owed (or refunded) will come out in the wash when the 2022:23 Self Assessment is submitted.

Jeremy535897

So the figures above are not going to be far out. A K code of 6344 applied to a pension of £8,500 makes no sense, as they can only take 50% of the pension. That would give the following result:
Tax due on £125,000 + £8,500 =£133,500: £37,700 @ 20% = £7,540 plus £87,440 @ 40% = £34,976 plus £8,360 @ 45% = £3,762, total £46,278
Tax collected on job £125,000 @ 20% = £25,000 plus £8,500 @ 50% = £4,250 totalling £29,250 resulting in an underpayment of £17,028
Definitely look at your personal tax account.