Tax Code Change.

miketaff1408

Hi, asking for a friend (no - really! I’m self employed).

they have just had a message from HMRC saying their tax code has changed from 122TX to K5201X. They (and I) have no idea what this means for them and what implications it will have on their take home pay. 

They currently work two jobs.

anyone have any idea?? If more details are needed to give an answer, please ask!

thanks for any input.

Dazed_and_C0nfused

miketaff1408 said:

Hi, asking for a friend (no - really! I’m self employed).

they have just had a message from HMRC saying their tax code has changed from 122TX to K5201X. They (and I) have no idea what this means for them and what implications it will have on their take home pay. 

They currently work two jobs.

anyone have any idea?? If more details are needed to give an answer, please ask!

thanks for any input.

They can use this calculator to check the impact.

http://payecalculator.hmrc.gov.uk/PAYE0.aspx

miketaff1408

Just tried the calculator and it’s saying that it’s not a valid tax code.

Dazed_and_C0nfused

You need to remove the X as that isn't part of the tax code.

That signifies it will be used on a non cumulative basis.

TadleyBaggie

From the horses mouth:

If your tax code has a ‘K’ at the beginning

Tax codes with ‘K’ at the beginning mean you have income that is not being taxed another way and it’s worth more than your tax-free allowance.

For most people, this happens when you’re:

• paying tax you owe from a previous year through your wages or pension
• getting benefits you need to pay tax on - these can be state benefits or company benefits

Your employer or pension provider takes the tax due on the income that has not been taxed from your wages or pension - even if another organisation is paying the untaxed income to you.

Employers and pension providers cannot take more than half your pre-tax wages or pension when using a K tax code.

chrisbur

miketaff1408 said:

Hi, asking for a friend (no - really! I’m self employed).

they have just had a message from HMRC saying their tax code has changed from 122TX to K5201X. They (and I) have no idea what this means for them and what implications it will have on their take home pay. 

They currently work two jobs.

anyone have any idea?? If more details are needed to give an answer, please ask!

thanks for any input.

Are you sure about that tax code as it means they will be taxed on their taxable income in that job plus tax on £52019, though in practise it would probably mean 50% tax on earnings in that job.  Could it be that the taxable income is £5201 and the code is K520X?
For any practical advise would need to know details of earnings in both jobs and tax codes for both jobs.

SiliconChip

Has your friend checked their personal tax account, which should detail how the new tax code has been arrived at?

[Deleted User]

chrisbur said:

miketaff1408 said:

Hi, asking for a friend (no - really! I’m self employed).

they have just had a message from HMRC saying their tax code has changed from 122TX to K5201X. They (and I) have no idea what this means for them and what implications it will have on their take home pay. 

They currently work two jobs.

anyone have any idea?? If more details are needed to give an answer, please ask!

thanks for any input.

Are you sure about that tax code as it means they will be taxed on their taxable income in that job plus tax on £52019, though in practise it would probably mean 50% tax on earnings in that job.  Could it be that the taxable income is £5201 and the code is K520X?
For any practical advise would need to know details of earnings in both jobs and tax codes for both jobs.

Completely agree - can’t recall ever seeing a K code that high!

I could be a pedant and point out that K codes actually round down as opposed to normal codes which don’t. So excess allowances of 52020 up to 52029 result in a K code of K5201. But I won’t! 

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11095

miketaff1408

I have just looked for them and tax code is definitely right! Don’t understand it.

their position is basically -

2022-23 worked one job 72k salary.

2023-24 that job reduced to 38k salary, started another job 66k salary. AFAIK they have paid normal levels of tax on both jobs this tax year

The tax code changed on 7/12.

they did do a tax return recently, only needed to do that as they had received child benefit which had to be paid back as that year (22-23) income went above the threshold for being entitled to child benefit. That was all paid back and was the only tax due.

i think they are going to have to ring HMRC I think. 

[Deleted User]

Have you checked the estimated income for each job on their personal account.

poppystar

Just had a similar change to a K tax code. It is scary and will leave me with much reduced income. I assume it’s to try to get tax on savings interest but from previous threads on here and a letter from HMRC I thought that was done in arrears not mid year. I already have a letter saying they will claw back last years tax on interest due by changing my tax code next year and I was planning on doing the self assessment at the end of this year for 23/24.  They appear to have done their own calculations and are wanting the tax due 23/24 rather than wait for the self assessment to be submitted. The K code goes well over and above the interest from last year so they seem to have assumed I’ve put my money in high interest accounts - what if I hadn’t then I would owe nowhere near the amount they are asking for? 

I wonder if this is a change of method for HMRC to now estimate and claim during the year rather than wait for self assessment or for the financial organisations to notify them of the interest received. Surely they will only have given HMRC the figures for the 22/23 by now and interest paid in 23/24 will be declared next year.