Tax Code change

canarydan

Afternoon all,

I'm a PAYE employed worker; however in the previous two tax years I have received some self-employed income, and will do so in the next two tax years. So I've had to fill out a self assessment, which seemed to go swimmingly both times. However, for the 2022/23 tax year, I made a couple of single payments into my pensions so that my adjusted net income stayed below £50,099 so that I wasn't stung by the High Income Child Benefit charge (three kids!). I made the payments in the last week of the tax year but received assurance from both pension providers that they would be considered as paid in the 22/23 tax year for my tax return purposes, so I promptly declared the adjusted net income below £50,099.

Job done, or so I thought.

I received a message from HMRC today asking me to check my account, which I promptly did and it has changed my tax code to give me a higher tax-free amount to take into account personal pension payments of £826. That is basically 25% of the total pension payments I made in 2022/23. Do they therefore just assume that I am going to do the same thing in this tax year as I did in the last one? Or have they treated my payments as arriving in 23/24? The latter would be odd, as it includes the tax benefit from a £25 a month contribution to a private pension I made throughout the year.

Also, they've made the assumption that I will receive the same amount from self-employed income this tax year. This is also incorrect. Whilst the previous two tax years have seen me get paid the same amount, this year it won't be. Basically, I did some consultancy work with regards to a company acquisition, and initially agreed to receive my payments in three chunks (March 22, March 23 and March 24). I've had the first two; however, they are going to pay me half in March 24 and half in April 24, so I can split it across two tax years and use two lots of the £1,000 tax-free allowance and mitigate against the High Income Child Benefit charge. It looks like there is an option to "update/remove" in my online HMRC account; would it be sensible to do that sooner rather than later? I'm 99% certain I won't be earning any other self-employed income for the foreseeable. 

Dazed_and_C0nfused

Do they therefore just assume that I am going to do the same thing in this tax year as I did in the last one?

Yes.  Presumably you don't tick the box on your return which says something along the lines of please don't mess with my tax code.

A tax code is only ever a provisional attempt to collect some tax so if you have more upto date information then you are usually free to update it as necessary.

canarydan

Dazed_and_C0nfused said:

Do they therefore just assume that I am going to do the same thing in this tax year as I did in the last one?

Yes.  Presumably you don't tick the box on your return which says something along the lines of please don't mess with my tax code.

A tax code is only ever a provisional attempt to collect some tax so if you have more upto date information then you are usually free to update it as necessary.

I must've missed that box. Cheers.

Albermarle

Also, they've made the assumption that I will receive the same amount from self-employed income this tax yea

What other assumption can they logically make, unless you inform them otherwise ?

 It looks like there is an option to "update/remove" in my online HMRC account; would it be sensible to do that sooner rather than later?
Yes, if you give them a more accurate estimate of your taxable earnings, then you should get a more accurate tax code.