Unexpected change to tax code

kidwell25

I'm a full-time employee paid via PAYE. I've just noticed that my tax code has changed on my last 2 payslips. It was previously 1257L but is now 1096L. I queried this with our payroll manager who showed me that she had received a P6 form from HMRC instructing her of this new tax code at the end of November. I've not received any notification personally from HMRC. I did exceed my personal savings allowance in 22/23 so - based on discussions on these forums - was expecting that my tax code would probably change at the start of the 24/25 year, but I've not seen anything to indicate that this would happen during the course of a tax year. I think I'll have to query this with HMRC, but does anyone have any thoughts as to what might have caused this change? The only thing I've been doing differently this year is coming close to maxing out additional pension contributions via salary sacrifice for the last few months to keep myself as a basic rate tax payer, but I'm struggling to see how that could be linked. Any ideas appreciated!

Dazed_and_C0nfused

Tax owed for 2022-23 would usually be collected via your 2024-25 tax code, exactly as you expected.

But when HMRC reviewed the 2022-23 tax year they would probably have also reviewed your 2023-24 tax code and provisionally adjusted this based on the latest information available i.e. using the interest details from 2022-23 as the most up to date estimate of the interest you will receive.

This adjustment to your tax code would only relate to 2023-24 and not be to collect tax for 2022-23.

You should be able to see a breakdown of your current 2023-24 tax code on your Personal Tax Account.

kidwell25

Thanks Dazed_and_C0nfused. I wasn't aware of the Personal Tax Account. I've just logged in using my Government Gateway credentials and it doesn't contain any of my tax details (just keeps asking me to update my address, then not accepting the date I moved in...) Think I'll still need to ring them (if only to sort that out!) but good to know that this doesn't seem to be a mistake.

Dazed_and_C0nfused

kidwell25 said:

Thanks Dazed_and_C0nfused. I wasn't aware of the Personal Tax Account. I've just logged in using my Government Gateway credentials and it doesn't contain any of my tax details (just keeps asking me to update my address, then not accepting the date I moved in...) Think I'll still need to ring them (if only to sort that out!) but good to know that this doesn't seem to be a mistake.

Ultimately what it means is there is less of a chance you will owe extra tax when 2023-24 is reviewed.  Or if you do owe something or will be less than it would otherwise have been.

If your interest goes the other way and reduces then anything overpaid will be automatically refunded by HMRC (or possibly in this instance reduce the tax owed from 2022-23).

kidwell25

One last question on this: I now need to reconsider my AVCs for this and next month.

The rationale is to keep my tax liability at the basic rate. I'd originally calculated my AVC thus:

£63,576 (salary) + £7000 (anticipated 23/24 savings interest after the £1000 personal savings allowance) - £12,570 (personal allowance) - £6294 ("normal" pension contribution) - £37,700 (20% tax threshold) = £14,012 in AVCs to make over the course of the year.

As my tax code has been changed to 1096 for my Dec, Jan, Feb and (presumably) March pay packets, am I right in thinking I need to change the £12,570 in that calculation to £12,033 [on the basis of: 8*(12,570 / 12) + 4*(10,960/12)]?

af1963

The 1096 code reflects your allowance for the full year, not just for the last 4 months. So replace the 12570 with 10960 in the calculation.

EDIT - actually, on second thoughts ... the calculation you're doing doesn;t really depend on your tax code.  The code doesn;t change your personal allowance, it just makes it possible for PAYE to take some tax from your salary to cover tax that is due elsewhere.