Online personal tax account query

Bear777

Hi. I was hoping someone could help me.

Having changed my pension contributions a number of years ago and not checking HMRC had the correct details, but thanks to advice on here I have being trying to sort out historic over payments of income tax - bit of a pain but getting there.

I am looking to try and ensure for the financial year (23/24) that things are more accurate and as such I am using my online personal tax account to ensure they have the correct details.  So I am looking to specifically change my income tax summary for 23/24. Initially, when I look at it my proposed income tax based on the info they have on file for 23/24 it is already looking like I will be paying nearly £1676 too much. I assume this difference equates to the higher income tax relief that is due on my pension contributions. 

I am looking to ensure they hold the correct information from the start on me. So on the basis of this I am amending my information in the following way and was looking for the experts here to sense check I’m getting it right. 

Updating my estimated taxable income by following the steps as below:

1. Entering my Gross Pay as per whats on my last payslip. (not including any bonuses) £5232.52

2. It then asks if my payslip shows deductions before tax and NI (Tell us if you have any deductions for pension contributions, salary sacrifice, allowable expenses, childcare vouchers & charitable donations).  At this point I say yes as I get Childcare vouchers and contribute to my pension.

3. It then asks for my taxable pay for the month (gross after deductions pensions, childcare vouchers being the two applicable to me).  So this is the point I get confused!! I have a relief at source pension so do I put in my gross or net pension contributions at this point?  So I contribute £1100 a month (£13,200 per annum) NET and this gets grossed up to £1375 a month (£16,500 per annum).  So if my childcare vouchers are £243 per month am I adding that to £1100 net or £1375 gross contributions to get the correct figure for the monthly deductions? £3889.52 or £3614.52 being the taxable pay?

4. So after removing the above (point 3) this then equates to my "taxable pay" or "taxable income".  I then add on a bonus based on what I got last year and am likely to get the same again this year. It then calculates my gross pay and my taxable pay.

So going back to my original query if you refer to point 3 above - what am I stating at that point?

Many thanks....

penners324

The figure for 23/24 will just be a projection on what information they have available. It won't impact your tax code.

How are you paying into your pension? Through work?

Get them to put you salary sacrifice 

Dazed_and_C0nfused

You appear to be hugely overcomplicating things.

HMRC are interested in what your P60 taxable pay is likely to be, that's what is used when determing your tax code.

You have to be very careful when considering pension contributions.  Understanding the method you use to contribute is absolutely vital.

Is this,
Net pay
Relief at source
Salary sacrifice

Bear777

Dazed_and_C0nfused said:

You appear to be hugely overcomplicating things.

HMRC are interested in what your P60 taxable pay is likely to be, that's what is used when determing your tax code.

You have to be very careful when considering pension contributions.  Understanding the method you use to contribute is absolutely vital.

Is this,
Net pay
Relief at source
Salary sacrifice

It was yourself that has helped me to date and I thank you for it. We previously identified that it was relief at source. 

Hugely overcomplicating things?? Story of my life lol!! 

Dazed_and_C0nfused

Bear777 said:

Dazed_and_C0nfused said:

You appear to be hugely overcomplicating things.

HMRC are interested in what your P60 taxable pay is likely to be, that's what is used when determing your tax code.

You have to be very careful when considering pension contributions.  Understanding the method you use to contribute is absolutely vital.

Is this,
Net pay
Relief at source
Salary sacrifice

It was yourself that has helped me to date and I thank you for it. We previously identified that it was relief at source. 

Hugely overcomplicating things?? Story of my life lol!! 

At the end of the day your tax code is just a provisional attempt at collecting the correct amount of tax.

You have a better idea than HMRC as to what both your taxable pay and gross RAS pension contributions will be for the current tax year and that's what they'll need to know to review/recalculate your tax code.

Bear777

Dazed_and_C0nfused said:

Bear777 said:

Dazed_and_C0nfused said:

You appear to be hugely overcomplicating things.

HMRC are interested in what your P60 taxable pay is likely to be, that's what is used when determing your tax code.

You have to be very careful when considering pension contributions.  Understanding the method you use to contribute is absolutely vital.

Is this,
Net pay
Relief at source
Salary sacrifice

It was yourself that has helped me to date and I thank you for it. We previously identified that it was relief at source. 

Hugely overcomplicating things?? Story of my life lol!! 

At the end of the day your tax code is just a provisional attempt at collecting the correct amount of tax.

You have a better idea than HMRC as to what both your taxable pay and gross RAS pension contributions will be for the current tax year and that's what they'll need to know to review/recalculate your tax code.

I do and given the help you previously gave me I have worked it all back for 23/24 and it’s wrong already. I have a whole spreadsheet set up that calculates it for me now. The issue is if I’m trying to resolve this as they appear to have more than just my pension contributions wrong, is that once I change one thing, even just my gross pay I have to inform them of all the figures. As per above it’s when I get to the deductions befoee tax and I’m not sure there whether to put the net figure that actually comes out of my salary or the gross figure (net +25%)….do you know which figure at that point I should be providing to them? 

Dazed_and_C0nfused

You should only need to tell them the gross contribution, inclusive of the basic rate relief.  But don't leave any room for ambiguity, make it clear that's what it is.

Don't forget your tax code won't ever include the gross contribution though.

In a very very simple scenario it will include a tax code allowance of 50% of the gross contribution.

Say you pay £2,000 to the pension company.

They add £500 in basic rate tax relief.

So you have a gross contribution of £2,500.

Your expected earnings (P60 pay estimate) are such that you will actually get higher rate tax relief on the whole £2,500.

The additional higher rate relief would result in a tax saving of £500.

Your estimated earnings are such that your employer will be deducting 40% tax on thousands of pounds of your pay.

HMRC include a pension contribution tax code allowance of £1,250 in your tax code.

Your tax code is increased by 125 points.  Say from 1257L to 1382L.

By the end of the tax year your employer will have deducted some 40% tax from your pay.

But you won't have paid 40% tax on that extra £1,250 because of your tax code increasing from 1257L to 1382L.

Not paying 40% tax on £1,250 has saved you £500.

£1,250 x 40% = £500.

To understand the equivalent of the £1,250 figure you would, at the very least, need to know how much HMRC estimate your earning (estimated P60 pay figure) to be.  And the (estimated) gross contribution they are using.

If that means you aren't going to get higher rate tax relief on the whole of the gross contribution the tax code allowances will be a less obvious amount.