Tax Code Change.

Dazed_and_C0nfused

poppystar said:

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. 

Tax owed for a prior year is normally collected in the next tax year but HMRC will also assume you continue to receive the same interest in the current tax year so your tax code can be adjusted for that, not to collect money from last year.

They don't make any assumptions about which accounts you use or the interest rates, it's just the same as lots of other things where they base the current tax year on the latest info from the previous tax year.

If you have recently filed your 2022-23 Self Assessment return how did you answer the question near the end of the return about using your current tax code to collect more tax?  It's a regular feature on here that people answer that question in a particular way and then seemed surprised by the outcome.
NB.  This is different to the question about collection of the tax due for 2022-23.

poppystar

Dazed_and_C0nfused said:

poppystar said:

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. 

Tax owed for a prior year is normally collected in the next tax year but HMRC will also assume you continue to receive the same interest in the current tax year so your tax code can be adjusted for that, not to collect money from last year.

They don't make any assumptions about which accounts you use or the interest rates, it's just the same as lots of other things where they base the current tax year on the latest info from the previous tax year.

If you have recently filed your 2022-23 Self Assessment return how did you answer the question near the end of the return about using your current tax code to collect more tax?  It's a regular feature on here that people answer that question in a particular way and then seemed surprised by the outcome.
NB.  This is different to the question about collection of the tax due for 2022-23.

I didn’t do a 22/23 self assessment as the interest was under £10k so haven’t seen that question. I was aware I’d need to for 23/24 and so wasn’t expecting them to want to collect tax in advance of the year end and my submission of the self assessment. I’ve never done one before so it is new territory and I expected, perhaps naively, that they would look at that and then calculate what I owed. 

The letter I had with respect to 22/23 said they’d collect the tax due by changing my code next year. 

So, if they’ve changed my tax code now are they doing it to collect the whole of their estimate for this year in three months or is it just three months worth they are collecting. Sorry if that’s a basic question but reconciling what I’m paying with my own figures is difficult when they make changes part way through the year. 

Dazed_and_C0nfused

poppystar said:

Dazed_and_C0nfused said:

poppystar said:

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. 

Tax owed for a prior year is normally collected in the next tax year but HMRC will also assume you continue to receive the same interest in the current tax year so your tax code can be adjusted for that, not to collect money from last year.

They don't make any assumptions about which accounts you use or the interest rates, it's just the same as lots of other things where they base the current tax year on the latest info from the previous tax year.

If you have recently filed your 2022-23 Self Assessment return how did you answer the question near the end of the return about using your current tax code to collect more tax?  It's a regular feature on here that people answer that question in a particular way and then seemed surprised by the outcome.
NB.  This is different to the question about collection of the tax due for 2022-23.

I didn’t do a 22/23 self assessment as the interest was under £10k so haven’t seen that question. I was aware I’d need to for 23/24 and so wasn’t expecting them to want to collect tax in advance of the year end and my submission of the self assessment. I’ve never done one before so it is new territory and I expected, perhaps naively, that they would look at that and then calculate what I owed. 

The letter I had with respect to 22/23 said they’d collect the tax due by changing my code next year. 

So, if they’ve changed my tax code now are they doing it to collect the whole of their estimate for this year in three months or is it just three months worth they are collecting. Sorry if that’s a basic question but reconciling what I’m paying with my own figures is difficult when they make changes part way through the year. 

Does your new tax code include a deduction for interest or interest and a deduction for an estimated underpayment?

poppystar

Dazed_and_C0nfused said:

poppystar said:

Dazed_and_C0nfused said:

poppystar said:

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. 

Tax owed for a prior year is normally collected in the next tax year but HMRC will also assume you continue to receive the same interest in the current tax year so your tax code can be adjusted for that, not to collect money from last year.

They don't make any assumptions about which accounts you use or the interest rates, it's just the same as lots of other things where they base the current tax year on the latest info from the previous tax year.

If you have recently filed your 2022-23 Self Assessment return how did you answer the question near the end of the return about using your current tax code to collect more tax?  It's a regular feature on here that people answer that question in a particular way and then seemed surprised by the outcome.
NB.  This is different to the question about collection of the tax due for 2022-23.

I didn’t do a 22/23 self assessment as the interest was under £10k so haven’t seen that question. I was aware I’d need to for 23/24 and so wasn’t expecting them to want to collect tax in advance of the year end and my submission of the self assessment. I’ve never done one before so it is new territory and I expected, perhaps naively, that they would look at that and then calculate what I owed. 

The letter I had with respect to 22/23 said they’d collect the tax due by changing my code next year. 

So, if they’ve changed my tax code now are they doing it to collect the whole of their estimate for this year in three months or is it just three months worth they are collecting. Sorry if that’s a basic question but reconciling what I’m paying with my own figures is difficult when they make changes part way through the year. 

Does your new tax code include a deduction for interest or interest and a deduction for an estimated underpayment?

I don’t have that detail. I’ll get into my account tomorrow and see if there is any more information there. I’ve not had a letter from HMRC  about this tax code change it was my pension provider that flagged up the change in code and warned of the drop in net pay this month. 

I’m quite happy to pay the tax due but would like to feel I know what is going on so I can reconcile it with my own calculations. I was quite pleased when I got the letter about the 22/23 tax due as it was pretty much what I was expecting. Maybe I should just do an end of year reconciliation rather than try to understand each tax code change? 

Thanks for your help.