Wrong tax code at new job - am I meant to correct it myself?

martin2345uk

Hi guys,

But confused over what my actions should be... I left my old job in February this year and started a new job a week later. I received my P45 from the old work about 3-4 weeks after starting, and sent this to the new employer. However they said:

I'm afraid your P45 was too late to be processed for this financial year 2022-2023. I would contact HMRC on 0300 200 3200, inform them that your previous earnings was not updated from your P45, therefore, there's a possibility overpayment of tax

I have tried to contact HMRC but it's honestly impossible, they just cut you off every time at the moment.

What should I do? On my first payslip in the new job my tax code was 0T, and today I received the second payslip and the tax code is now 1001L.

Any advice gratefully received!

Dazed_and_C0nfused

Simplest thing to do to start with is go onto your Personal Tax Account and see how the 1001L tax code has been calculated.

Chances are 1001L is correct.

But the devil is in the detail.

martin2345uk

OK, thank you... I have had a look in my Personal Tax Account... it says this:

Personal Allowance:  £12,570
Additions: £100 (for flat rate expenses)
Deductions: £2,658 (because I underpaid £1,063 tax in a previous year)
Total: £10,012 

So yeah the 1001L code looks correct from their calculations but I do not understand how I underpaid £1,063 last year (it doesn't actually say which year), I was paying normal PAYE tax right until my final payslip from my old employer...

EDIT: actually I have looked at the final payment I got from the old employer... it contained £201 of earnings (A day of so of earnings), and then bizarrely a PAYMENT to me of £889.60 income tax! Which seems utterly bizarre... I guess that is very much related to it all!

I guess I need to contact the old employer to find out what that was about....

comeandgo

martin2345uk said:

OK, thank you... I have had a look in my Personal Tax Account... it says this:

Personal Allowance:  £12,570
Additions: £100 (for flat rate expenses)
Deductions: £2,658 (because I underpaid £1,063 tax in a previous year)
Total: £10,012 

So yeah the 1001L code looks correct from their calculations but I do not understand how I underpaid £1,063 last year (it doesn't actually say which year), I was paying normal PAYE tax right until my final payslip from my old employer...

EDIT: actually I have looked at the final payment I got from the old employer... it contained £201 of earnings (A day of so of earnings), and then bizarrely a PAYMENT to me of £889.60 income tax! Which seems utterly bizarre... I guess that is very much related to it all!

I guess I need to contact the old employer to find out what that was about....

You must have got a tax rebate that month due to the low monthly earnings of £201.  

martin2345uk

Oh that makes sense thank you, so the normal thing now is to pay a bit more tax every month this year, because that "rebate" was in fact spurious as their systems thought that was what I am getting per month now and therefore had paid too much tax?

Or something along those lines?

Dazed_and_C0nfused

Possibly yes.

What you could do is check your P45 and P60 (or final payslip of the year) to see what the correct tax should be.

If you don't owe £1,063 when HMRC review 2022-23 they will send you a calculation and adjust your tax code accordingly.

martin2345uk

I am looking at the P45, should I be looking at the Total Pay and Total Tax to Date part? They are:

57,270.64 total pay
10,296.00 total tax

which according to the online salary calculator I found, seems pretty much correct..?

chrisbur

martin2345uk said:

I am looking at the P45, should I be looking at the Total Pay and Total Tax to Date part? They are:

57,270.64 total pay
10,296.00 total tax

which according to the online salary calculator I found, seems pretty much correct..?

As you say that looks close to the figure for tax due for the year; but then your new employer has made a further payment for that tax year.  To work out the correct tax can you give the details (taxable gross and tax paid) for that payment and also the tax code on the P45.  It is probable that you have an overlap of payments for 22/23 with both new and old employers paying for the same tax month.  The new employer did not give you a tax allowance as 0T code was used but they would have given you a 20% tax band allowance which has probably been used also by the old employer.  With figures this can be checked.

martin2345uk

Okay so my new employer's first payslip, for tax period 12, the details are:

Taxable Gross - 5,313.64
Tax Paid - 1,062.60
Tax code on P45 (Tax code on leaving date) - 1267L

Actually that "Tax Paid" is pretty much the exact amount HMRC are saying I underpaid by...??

Dazed_and_C0nfused

martin2345uk said:

Okay so my new employer's first payslip, for tax period 12, the details are:

Taxable Gross - 5,313.64
Tax Paid - 1,062.60
Tax code on P45 (Tax code on leaving date) - 1267L

Actually that "Tax Paid" is pretty much the exact amount HMRC are saying I underpaid by...??

Assuming you were paid twice in month 12 of the tax year then the tax due on that final £5313 was really £2,125.

But you only paid half that (20% rather than 40%).

So basically a 12 month interest free loan 😄

chrisbur

So we now have taxable gross of 62584.28 and tax paid of 11358.60
Tax due on 62584.28 assuming standard tax code  ( wont be standard as there was a £100 adjustment but near enough) is 12462.11 and you paid 11358.60  so 1103.51 underpaid.
Figures will not be 100% accurate as I used a tax calculator and there was that £100 adjustment but near enough we have a difference of £1103 underpaid tax.
As I suggested this is the result of each employer giving you some tax allowance at 20% which had the P45 gone through in time would have been deducted at 40%.