How to interpret tax code

poppystar

I’m trying to get my head around how HMRC thinks and hence as to what they are estimating savings interest to be.

I have pension (x) and state pension (y) and a tax code of K1356

The explanation I can find for the code is that I need to pay tax on an extra £13560. I can’t reconcile any figures that get to what the tax being deducted is.

So:
1. Should the tax being deducted be worked out on the full value of x+y + 13560? This would surely mean I had no personal allowance being deducted from the total

2. or, is it x+y+ 13560 less the allowance of 12570 + 1000 savings nil rate, which doesn’t seem enough?

Using 2 above they would seem to be assuming a level of savings interest at around £15k (13560 + difference between personal allowance and value of state pension) 
Using 1 above they would seem to be assuming savings interest of £26k. (£13560 + personal allowance of £12570


Any help really appreciated my brain is frying!  Apologies if the answer is really obvious. 

Also, whichever of the estimates for savings interest is correct, would this relate to 23/24 or 24/25 or both? ie what am I actually paying tax on at the moment. 

Thanks

molerat

K1356 means you are being taxed on £13560 on top of all your other income. Your full personal allowance plus £13560, so £26130, is being used up by other untaxed income / tax owed, the state pension being one part of that. Savings interest is often coded as owed from last year + the same for this.  You need to check your on line tax account or the coding letter to see how they have arrived at your code, the full breakdown will be there. 

Albermarle

Have you had the non state  pension being paid for long? Sometimes when you have a new taxable income stream, or a change, the HMRC system can make wrong assumptions about your estimated annual income. On your personal tax account you can change the estimated income if it is wrong and this will generate a new tax code. Just an idea.

poppystar

molerat said:

K1356 means you are being taxed on £13560 on top of all your other income. Your full personal allowance plus £13560, so £26130, is being used up by other untaxed income / tax owed, the state pension being one part of that. Savings interest is often coded as owed from last year + the same for this.  You need to check your on line tax account or the coding letter to see how they have arrived at your code, the full breakdown will be there. 

Thanks, so they are estimating savings interest at around the £15k (£26130 - state pension)? That would make some sense for it to be estimated at around £7.5k for each of 23/24 and 24/25 (based on 22/23). Good to know they are collecting for two years at the same time. 

I didn’t receive a coding letter for this change for some reason - they’d previously changed my code four times in as many months but only two of those were actioned by the pension provider because, presumably of the timing. I spent a long time online today but whilst I found their estimate for personal pension and state pension along with the allowances I could find no breakdown of how the tax code was arrived at. In previous years I’ve found a breakdown when they had figures and it was clear tax was owing but there was no breakdown  for this year or last. Could it be they are waiting on getting info from the savings institutions for 23/24 before showing the detail?I tried the link to each years tax summary but the information there was very scant. 

poppystar

Albermarle said:

Have you had the non state  pension being paid for long? Sometimes when you have a new taxable income stream, or a change, the HMRC system can make wrong assumptions about your estimated annual income. On your personal tax account you can change the estimated income if it is wrong and this will generate a new tax code. Just an idea.

No it’s a long standing pension. They have used a lower figure for it but only by a slight amount. I assume they were basing it on last years value. 

It’s not that I’m wanting to question the coding it’s just that I’d like to understand how much I’m paying now to cover savings interest and in regard to which year. 

Dazed_and_C0nfused

poppystar said:

molerat said:

K1356 means you are being taxed on £13560 on top of all your other income. Your full personal allowance plus £13560, so £26130, is being used up by other untaxed income / tax owed, the state pension being one part of that. Savings interest is often coded as owed from last year + the same for this.  You need to check your on line tax account or the coding letter to see how they have arrived at your code, the full breakdown will be there. 

So they are estimating savings interest at around the £15k (£26130 - state pension)? That would make some sense for it to be estimated at around £7.5k for each of 23/24 and 24/25 (based on 22/23). Good to know they are collecting for two years at the same time. 

I didn’t receive a coding letter for this change for some reason. I spent a long time online today but whilst I found their estimate for personal pension and state pension along with the allowances I could find no breakdown of how the tax code was arrived at. In previous years I’ve found that when they had figures and it was clear tax was owing but there was no information on that for this year or last. Could it be they are waiting on getting info from the savings institutions for next year. I tried the link to each years tax summary but the information there was very scant. 

That isn't how tax codes work.  You would only have interest for a single tax year in your tax code at once.

It might be an estimate but it's only ever one year at a time.

You are much more likely to find the deductions include one or more of the following,

Tax owed from 2022-23 (or earlier)
Tax owed from 2023-24
Tax owed for the current tax year (as your tax code was reduced part way through the year).

It might not be very intuitive but if you search around your Personal Tax Account enough you will find the proper breakdown of how the K1356 was calculated.

HMRC should have all the interest details for 2023-24 now (the deadline for yesterday banks was 30 June) but whether they have updated everyone nes tax records with all the bank account data is anyone's guess.

poppystar

Dazed_and_C0nfused said:

poppystar said:

molerat said:

K1356 means you are being taxed on £13560 on top of all your other income. Your full personal allowance plus £13560, so £26130, is being used up by other untaxed income / tax owed, the state pension being one part of that. Savings interest is often coded as owed from last year + the same for this.  You need to check your on line tax account or the coding letter to see how they have arrived at your code, the full breakdown will be there. 

So they are estimating savings interest at around the £15k (£26130 - state pension)? That would make some sense for it to be estimated at around £7.5k for each of 23/24 and 24/25 (based on 22/23). Good to know they are collecting for two years at the same time. 

I didn’t receive a coding letter for this change for some reason. I spent a long time online today but whilst I found their estimate for personal pension and state pension along with the allowances I could find no breakdown of how the tax code was arrived at. In previous years I’ve found that when they had figures and it was clear tax was owing but there was no information on that for this year or last. Could it be they are waiting on getting info from the savings institutions for next year. I tried the link to each years tax summary but the information there was very scant. 

That isn't how tax codes work.  You would only have interest for a single tax year in your tax code at once.

It might be an estimate but it's only ever one year at a time.

You are much more likely to find the deductions include one or more of the following,

Tax owed from 2022-23 (or earlier)
Tax owed from 2023-24
Tax owed for the current tax year (as your tax code was reduced part way through the year).

It might not be very intuitive but if you search around your Personal Tax Account enough you will find the proper breakdown of how the K1356 was calculated.

HMRC should have all the interest details for 2023-24 now (the deadline for yesterday banks was 30 June) but whether they have updated everyone nes tax records with all the bank account data is anyone's guess.

Tax owed 22/23 was collected in the last three months of last year through a different K code and shows as nothing owing.

The K1356 has been in force from April 2024 and hasn’t changed.

Any clues as to where in the tax account I can find the breakdown? As I said in reply to @molerat I can’t get anything more than summary figures and no breakdown of the code at all. I really did try all the links I could find! 

I eventually found how to register for self assessment for last year but really wanted to know if or how much of that year’s tax due on the savings interest I was currently paying. If there is only ever one year being paid at once does that mean all I’m currently paying for is an estimate for 24/25? 

molerat

As I said in reply to @molerat I can’t get anything more than summary figures and no breakdown of the code at all. I really did try all the links I could find!

PAYE - Check current tax year - right hand side under Annual amounts - What makes up your tax-free amount

Dazed_and_C0nfused

poppystar said:

Dazed_and_C0nfused said:

poppystar said:

molerat said:

K1356 means you are being taxed on £13560 on top of all your other income. Your full personal allowance plus £13560, so £26130, is being used up by other untaxed income / tax owed, the state pension being one part of that. Savings interest is often coded as owed from last year + the same for this.  You need to check your on line tax account or the coding letter to see how they have arrived at your code, the full breakdown will be there. 

So they are estimating savings interest at around the £15k (£26130 - state pension)? That would make some sense for it to be estimated at around £7.5k for each of 23/24 and 24/25 (based on 22/23). Good to know they are collecting for two years at the same time. 

I didn’t receive a coding letter for this change for some reason. I spent a long time online today but whilst I found their estimate for personal pension and state pension along with the allowances I could find no breakdown of how the tax code was arrived at. In previous years I’ve found that when they had figures and it was clear tax was owing but there was no information on that for this year or last. Could it be they are waiting on getting info from the savings institutions for next year. I tried the link to each years tax summary but the information there was very scant. 

That isn't how tax codes work.  You would only have interest for a single tax year in your tax code at once.

It might be an estimate but it's only ever one year at a time.

You are much more likely to find the deductions include one or more of the following,

Tax owed from 2022-23 (or earlier)
Tax owed from 2023-24
Tax owed for the current tax year (as your tax code was reduced part way through the year).

It might not be very intuitive but if you search around your Personal Tax Account enough you will find the proper breakdown of how the K1356 was calculated.

HMRC should have all the interest details for 2023-24 now (the deadline for yesterday banks was 30 June) but whether they have updated everyone nes tax records with all the bank account data is anyone's guess.

Tax owed 22/23 was collected in the last three months of last year through a different K code and shows as nothing owing.

The K1356 has been in force from April 2024 and hasn’t changed.

Any clues as to where in the tax account I can find the breakdown? As I said in reply to @molerat I can’t get anything more than summary figures and no breakdown of the code at all. I really did try all the links I could find! 

I eventually found how to register for self assessment for last year but really wanted to know if or how much of that year’s tax due on the savings interest I was currently paying. If there is only ever one year being paid at once does that mean all I’m currently paying for is an estimate for 24/25? 

You can be paying for all sorts via your tax code but once the tax year has ended it's only in very rare circumstances that a tax code includes something from a prior tax year that isn't tax owed.

Tax you owe will be specifically called something like tax owed, estimated underpayment or underpayment.  

An interest deduction in your current tax code would only relate to the current tax year. 

Tax owed on interest from a previous year might be being collected in this years tax code but that would be called tax owed or an underpayment.  It wouldn't be called interest or untaxed interest.