Tax Code 23/24

mysk_girl

I've just had a look at my HMRC account and seen that they have generated my tax code for this year as 1300L. Made up of £12570 personal allowance and £432 personal pension payments. 

I'm assuming this is something to do with just having tipped into higher rate tax for this coming year for the first time? I got a promotion in January and have never fallen into higher rate before this. 

Salary is £59,730, with 8.5% salary sacrifice to the LGPS pension and an additional £100 per month into the AVC via salary sacrifice. 

I can't work out how the extra allowance is calculated, if anyone has a link to how this works I would be really grateful. Also am receiving child benefit for 3 kids so I'm going to be hit with some repayment of that for the first time. 

The HMRC app has my estimated taxable income as £53,450 which sounds about right? I'm just really anxious not to end up owing money at some point!

Dazed_and_C0nfused

If you only get money into your pension using salary sacrifice then you aren't due any extra tax relief and need that entry removing.

Salary sacrifice means you aren't contributing to the pension, you are agreeing to a reduced salary in return for extra employer contributions.

And you cannot have tax relief on employer contributions.

You avoid paying tax and NI by not having the salary in the first place.

It might simply be some old info that needs removing.

Albermarle

If you were contributing to your pension from already taxed pay, then as a higher rate taxpayer, you would need to inform HMRC of your pension payments, and they might well increase your personal tax allowance.

However as said above this does not apply when contributions are made in a salary sacrifice scheme. So looks like some kind of error. Unless maybe have you filled a tax return last year and mistakenly entered a figure in the 'pensions box'? 

mysk_girl

Thanks for that - I believe strictly speaking my £100/month is £99 salary sacrifice and £1 employee contribution but for £12 a year I'm not going to get fussed about any tax I might be due. 

Beyond that everything is salary sacrifice so I will ask HMRC to remove it. I've never done a tax return before so it can't be that. 

Am aware I will have to register for one to pay the CB charge but that's not due for a while? This tax year is the first year I will be liable.

molerat

Surely you could be putting some more in to that pension to avoid the HICBC ?

mysk_girl

Would need to wait and see how the next few months goes - I'm trying to play with figures to see how much better / worse off we would be if I did that. I have 3 different answers so far!

Husband income is variable as he is an employed company director so it's salary and dividends, but we never know until year end how much it's going to be in total. Won't go over £50k though, I am now by far the higher earner. 

Dazed_and_C0nfused

The more children you are getting Child Benefit for the more tax efficient it becomes.

Your taxable pay looks to be around £53,450.  Add in say £250 in (taxable) interest and you could have a HICBC charge of 37%.

CB for 3 kids is approaching £3k so you could easily be having to pay £1k+ back.

Extra pension contributions could avoid that and benefit from a (mostly) 40% tax saving.  And a bit of NI saving as well.

Certainly worth thinking about.

mysk_girl

Work do a salary sacrifice cycle to work scheme - I assume that would count? Kids are getting older, I have more time in the mornings etc as they are now on school buses etc so for a 7 mile commute to work it might be worth thinking about that if it's going to help?

I mean I could certainly stand to do more exercise so a two birds / one stone solution maybe