Tax Code Notice Question

gt568
gt568 Posts: 2,492
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Hey dudes!

I've just received my tax code notice for 24-25....

And it states this...

Pers Allowance                          12570
Total                                           12570
Less Adjustment to Rate Bands 10115
Total Tax Free amount                2455

What is the "less adjustment to Rate bands"? 
and why do I only get 2455 as a tax free allowance?

Sorry if these are stupid questions.....

I have an income and a pension in payment.

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  • la531983
    la531983 Posts: 1,661
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    Are you receiving the State pension or a private one?
  • molerat
    molerat Posts: 31,541
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    Your total income makes you a higher rate tax payer but each income individually will only deduct tax at basic rate so reducing your allowance will take that extra tax.
  • BoGoF
    BoGoF Posts: 6,756
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    edited 8 February at 2:43PM
    gt568 said:
    Hey dudes!

    I've just received my tax code notice for 24-25....

    And it states this...

    Pers Allowance                          12570
    Total                                           12570
    Less Adjustment to Rate Bands 10115
    Total Tax Free amount                2455

    What is the "less adjustment to Rate bands"? 
    and why do I only get 2455 as a tax free allowance?

    Sorry if these are stupid questions.....

    I have an income and a pension in payment.

    I would hazard a guess that you have more than one income source which when combined takes you into the higher rate bracket? The other source is likely coded BR and to avoid any underpayment of tax HMRC will try and estimate how much of the basic rate band will be used at that other source.
  • gt568
    gt568 Posts: 2,492
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    la531983 said:
    Are you receiving the State pension or a private one?

    A government based pension.
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  • gt568
    gt568 Posts: 2,492
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    I get 48k salary and 12k pension.
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  • gt568
    gt568 Posts: 2,492
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    molerat said:
    Your total income makes you a higher rate tax payer but each income individually will only deduct tax at basic rate so reducing your allowance will take that extra tax.

    It says my pension has the 2k tax allowance and my wage is at BR
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  • BoGoF
    BoGoF Posts: 6,756
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    edited 8 February at 3:06PM
    gt568 said:
    I get 48k salary and 12k pension.
    So on a total income of £60k your total tax payable is £11,432 (£60,000 - £12,570 then £37,700 @ 20% & £9730 @ 40%).

    BR code on your £48k salary would collect £9,600 and if you could an unrestricted tax code on your pension you would pay nil so £1,832 underpaid. The restricted tax code of £2455 means you pay 20% on £9,545 of your pension (£12,000 - £2,455) = £1909. There is a slight discrepancy in the overall tax paid (£77 too much paid) but would need to see what the actual estimates HMRC are using to reconcile.
  • molerat
    molerat Posts: 31,541
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    edited 8 February at 3:11PM
    £60K income puts you around £10K into 40% tax but only 20% is being deducted through PAYE.  Reducing your code by £10K collects the additional 20% on that £10K.
  • gt568
    gt568 Posts: 2,492
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    This presumably all takes into account the SMART pension contributions of 240pm?

    Someone at work said I'd be better of putting the tax free allowance against the wage and BR the pension but I can't see how that will make a difference?
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  • gt568
    gt568 Posts: 2,492
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    So in essensce the "band adjustment" is how I'm paying the 40% tax element?

    If only 10k of my income is in the 40% bracket why is my tax free allowance reduced by 10k?  What am I missing here?  Sorry for seeming thick, only ever had 1 income previously....
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