Tax code

Hamiltonc

How do you work out tax code?

Say when submit self assessment for the current tax year and you select for it to be paid in the following tax year via your tax code, say the deduction is £2000, how do you work out what that is in terms of the tax code?  They would take £2000 over 12 installments 

Thank you 

Dazed_and_C0nfused

Hamiltonc said:

How do you work out tax code?

Say when submit self assessment for the current tax year and you select for it to be paid in the following tax year via your tax code, say the deduction is £2000, how do you work out what that is in terms of the tax code?  They would take £2000 over 12 installments 

Thank you 

I presume you mean the tax to be collected is £2,000?

If so then for most people the tax code entry would be either £5,000 or £10,000.

£5,000 for a higher rate payer means the employer or pension payer would deduct an extra £2,000 (£5,000 x 40%).

£10,000 for a basic rate payer means the employer or pension payer would deduct an extra £2,000 (£10,000 x 20%).

If can be more complicated in some cases, for example where the deduction means extra tax will be deducted at a mix of 20% and 40% or Scottish residents who could have several  different tax rates involved.

Hamiltonc

It's 20 and 40% - they will deduct normal but 2000/12 per month too for example 

Dazed_and_C0nfused

Hamiltonc said:

It's 20 and 40% - they will deduct normal but 2000/12 per month too for example 

Do you mean

1.  You are a 20% payer but because of the £2,000 being collected you will pay some 40% tax?

Or

2.  You mean you will be paying 20% and 40% before the £2,000 is factored in?

If 2 then what is your P60 for 2025-26 likely to show your taxable pay as?

Hamiltonc

It's standard deductions plus £2,000 (for example divided by 12 - higher rate tax payer 

How do I work out the tax code

Dazed_and_C0nfused

Hamiltonc said:

It's standard deductions plus £2,000 (for example divided by 12 - higher rate tax payer 

How do I work out the tax code

You would have to give a lot more information for anyone to answer that.

But as explained in my original post the tax code deduction to collect £2,000 is likely to be either,

£5,000 for a higher rate payer means the employer or pension payer would deduct an extra £2,000 (£5,000 x 40%).

£10,000 for a basic rate payer means the employer or pension payer would deduct an extra £2,000 (£10,000 x 20%).

If you are going across 20% and 40% bands then it could be anywhere between £5,000 and £10,000.

Hamiltonc

But surely there is a set way that they will work out my tax code for it?

molerat

As D&C has explained above they will reduce your coded tax free amount by £5-10K depending on your expected income and tax rate, a reduction of between 500 and 1000 points from your code.

Hamiltonc

It will be 166.66 per month on top of standard deductions of tax etc 

Hoenir

Hamiltonc said:

But surely there is a set way that they will work out my tax code for it?

There is. Your can check how your tax code has been calculated by logging onto your online Personal Tax Account. 

Hamiltonc

This is for next year, won't be received until Jan or something