Paye calculation following tax code change

paddysreturn

Hi,

If my tax code changes half way through the year (following self assessment) does the new code represent the level at which I will be taxed for the remaining 6 months or my total tax free allowance for the whole year?

As an example:

If my tax code changes after 6 months of the tax year from 1215L to 715L, would my remaining 6 salary payments be calculated off a 715L code or a 215L code (which would balance out at 715L over the 12 months).

Thanks in advance for any response 

Dazed_and_C0nfused

paddysreturn said:

Hi,

If my tax code changes half way through the year (following self assessment) does the new code represent the level at which I will be taxed for the remaining 6 months or my total tax free allowance for the whole year?

As an example:

If my tax code changes after 6 months of the tax year from 1215L to 715L, would my remaining 6 salary payments be calculated off a 715L code or a 215L code (which would balance out at 715L over the 12 months).

Thanks in advance for any response 

It is almost certainly just 715L from now on, with whatever happened earlier in the tax year ignored when your employer/pension payer calculated your tax each payday.

You need to check the basis on which the code was issued, it will either be cumulative  or non-cumulative.

Non cumulative means each payday is looked at in isolation without reference to what you earned in previous pay periods.

Tax code have no relevance when it comes to your overall tax liability though, they are simply a way of reducing some tax during the tax year, your next Self Assessment will establish the actual tax due/overpaid.

paddysreturn

That’s great, thank you. I have been taxed at 715L since Oct but was worried I was being undertaxed.

Thanks for the clarification 

zagfles

If the tax code changed like that you'd have had a big one off extra payment of tax when it changed. What HMRC usually do when tax codes go down is put you on non cumulative when the code is reduced, do you have M1 or W1 or X after your code? They may have accounted for any underpaid tax in the code. What does the tax code notice show?

paddysreturn

Hi Zagfles

My updated tax code is 238L M1. 

When filling in my self assessment I opted to pay the outstanding amount though my PAYE. At the current rates I would pay approx 125% of my ‘debt’.

However, my previous experience with HMRC led me to believe that in these situations, not only do they collect the monies owed from the previous year but also adjust the projection for the current year so that I don’t end up owing again when I next complete my SA100.

Dazed_and_C0nfused

paddysreturn said:

Hi Zagfles

My updated tax code is 238L M1. 

When filling in my self assessment I opted to pay the outstanding amount though my PAYE. At the current rates I would pay approx 125% of my ‘debt’.

However, my previous experience with HMRC led me to believe that in these situations, not only do they collect the monies owed from the previous year but also adjust the projection for the current year so that I don’t end up owing again when I next complete my SA100.

I think you're getting confused about what's happening.

Tax owed from your 2022-23 Self Assessment return isn't being collected via your current (2023-24 tax code).

The tax due for 2022-23 would only be included in your 2024-25 tax code.

The adjustment to your 2023-24 tax code is an attempt to collect extra tax towards your 2023-24 liability, it's nothing to do with what is owed form 2022-23.