Tax Code Confusion

cossie23

Hi Everyone,

 

Was wondering if any kind soul can help or maybe point me in the right direction on problem that seems to have manifested with my tax code. I’ve spoken to HMRC twice (each time over an 1hr waiting) however I don’t think they're understating my issue.

For the last 7 years I’ve been paying 12K into a private pension. Pension company claims 25% and as a higher rate tax payer I’m trying to claim the additional tax back via Self-Assessment.

Looking at the tax code letters that come through the post from 2018 to 2022 I have a line that says “Personal Pension Relief…..  which I assumed was correct.

For tax years 2023/2024 there was no line about Personal Pension Relief

For tax year 2024/2025 there was no line about Personal Pension Relief

Last year I phoned and HMRC said that there were changes on going to the way tax relief is given but it would sort itself out so I left it. This year I phoned and they said “a box must have been ticked on your self-assessment form, what do you want it changed to?”. I wasn’t expecting that so went for my previous code which was 2056L. I should mention that I pay an accountant to help with the self assessment.

 When I came off the phone I thought the tax code should be 12570L + 3000 pension relief so 1575L but maybe I’m way off, not sure.

Its all very confusing and cant say that speaking to HMRC is a pleasant experience as I get bamboozled so quick. I asked my accountant to help but they said tax codes are my problem. I then asked my financial advisor for a quick look over and he said easiest way was to ask HMRC to fix my tax code at the standard allowance 1257L as then I know how much I’m paying each month.  Any money I’m due back would be sorted out via a cheque.

 Any thoughts or help? I honestly don’t know where else to turn!!!

Dazed_and_C0nfused

Firstly a tax code is only ever provisional, the correct tax relief will always be finalised via your Self Assessment return (whilst you complete one).

So did your returns for the years to 2022-23 include the correct entry for your relief at source (RAS) pension contributions?

How much do you expect to pay (the gross amount) in the 2024-25 tax year?

How much do you expect your PAYE income to be in the 2024-25 tax year?

cossie23

Hi, 

Yes the tax returns have been the same for years as I check before signing. 

Pension for 2024/25 would be same again 12K then the relief on top of that.

PAYE income would be around 70K 

Thanks for fast response! 

Dazed_and_C0nfused

cossie23 said:

Hi, 

Yes the tax returns have been the same for years as I check before signing. 

Pension for 2024/25 would be same again 12K then the relief on top of that.

PAYE income would be around 70K 

Thanks for fast response! 

Do you mean the gross contribution is £15,000?

And your P60 will show taxable pay of £70k?

[Deleted User]

cossie23 said:

Hi, 

Yes the tax returns have been the same for years as I check before signing. 

Pension for 2024/25 would be same again 12K then the relief on top of that.

PAYE income would be around 70K 

Thanks for fast response! 

You pay £12000 into your pension and your provider has this grossed up to £15000. 

You are entitled to additional relief of £3000. 

To obtain this you would require a positive adjustment to your tax code of 7500 - 40% of 7500 is £3000. 

cossie23

Dazed_and_C0nfused said:

cossie23 said:

Hi, 

Yes the tax returns have been the same for years as I check before signing. 

Pension for 2024/25 would be same again 12K then the relief on top of that.

PAYE income would be around 70K 

Thanks for fast response! 

Do you mean the gross contribution is £15,000?

And your P60 will show taxable pay of £70k?

Yes thats correct on both items. 

cossie23

[Deleted User] said:

cossie23 said:

Hi, 

Yes the tax returns have been the same for years as I check before signing. 

Pension for 2024/25 would be same again 12K then the relief on top of that.

PAYE income would be around 70K 

Thanks for fast response! 

You pay £12000 into your pension and your provider has this grossed up to £15000. 

You are entitled to additional relief of £3000. 

To obtain this you would require a positive adjustment to your tax code of 7500 - 40% of 7500 is £3000. 

Ok so from my basic understanding this would equate to the normal 12570 allowance plus the 3K would be a tax code of 1557L?

[Deleted User]

cossie23 said:

[Deleted User] said:

cossie23 said:

Hi, 

Yes the tax returns have been the same for years as I check before signing. 

Pension for 2024/25 would be same again 12K then the relief on top of that.

PAYE income would be around 70K 

Thanks for fast response! 

You pay £12000 into your pension and your provider has this grossed up to £15000. 

You are entitled to additional relief of £3000. 

To obtain this you would require a positive adjustment to your tax code of 7500 - 40% of 7500 is £3000. 

Ok so from my basic understanding this would equate to the normal 12570 allowance plus the 3K would be a tax code of 1557L?

Nope - 12570 plus 7500 equals 20070 - 2007L

Your receive an additional allowance of 7500.
This means that 7500 LESS of your income is taxed at 40%.

The saving would be £3000 which is 40% of 7500. 

If your code was adjusted by 3000 you would only save £1200.

cossie23

Ahhh ok think I've got it. So your figure of 2007L roughly matches what my tax code has been for years.. 2056L.. give or take. Ok so that's good as that's what HMRC set my tax code to when i phoned last week.
 I still cant explain why on earth the line Personal Tax Relief was removed from the letter as nothing at has changed to my circumstances. I keep thinking I've missed out on the relief but I'm not confident enough to challenge this with HMRC!

[Deleted User]

cossie23 said:

Ahhh ok think I've got it. So your figure of 2007L roughly matches what my tax code has been for years.. 2056L.. give or take. Ok so that's good as that's what HMRC set my tax code to when i phoned last week.
 I still cant explain why on earth the line Personal Tax Relief was removed from the letter as nothing at has changed to my circumstances. I keep thinking I've missed out on the relief but I'm not confident enough to challenge this with HMRC!

There is more of a difference that you might think between 2007L and 2056L - up to 499 of allowances! 

Were you HR every year?

I would be checking 2022/23 again - you have another four years to do so!

cossie23

Thanks for all your help by the way, VERY much appreciated as was getting nowhere before! A glimmer of hope in setting my mind at rest! 

I've been higher rate for at least 15 years now 

Tax codes are: 

20/21 - S2018L
21/22 - S2056L
22/23 - S2056L
23/24 -S2074L
24/25 - S2074L (this was updated on the HMRC website last week when I phoned)

Might be slight changes due to working from home claims for some of those years