Please help me understand my tax code change

greenglove

Hello, I am in full time employment with a tax code 1303L. I have a second job which is on tax code BR. I recently updated my estimated income on the second job which will push me into the higher 40% tax bracket. My tax code for FT main job has now changed to 1054LX. Am I now going to pay more tax on main job? I was hoping that I was only be taxed the 40% on second job, and main job income after tax would remain the same.
any help or clarity much appreciated.

eskbanker

Has the code for the second job been changed too?  Can you see any details within your personal tax account of the basis of the codings?

Dazed_and_C0nfused

greenglove said:

Hello, I am in full time employment with a tax code 1303L. I have a second job which is on tax code BR. I recently updated my estimated income on the second job which will push me into the higher 40% tax bracket. My tax code for FT main job has now changed to 1054LX. Am I now going to pay more tax on main job? I was hoping that I was only be taxed the 40% on second job, and main job income after tax would remain the same.
any help or clarity much appreciated.

You would only have a 40% tax code (D0) on the second job if you were also paying 40% tax on your full time/main job.

If that isn't the case, which seems to be the situation here, you will remain on basic rate (BR) at the second job and have an adjustment to your main tax code instead.

The reason for that is if you have a 40% (D0) tax code at the second job when you aren't paying 40% tax on your main job you will be missing out on some of your basic rate band.  And I have never seen a code adjustment that caters for that.

You will have something called an adjustment to rate band in your main tax code instead.

You are no doubt aware of this but keeping HMRC up to speed with your estimated earnings is particularly useful in this situation as it minimises the chance of there being an under or overpayment of tax at the end of the year.

Albermarle

Not sure why it matters on which job you pay the 40% tax, as overall you will pay the same amount of tax either way. 

greenglove

Thank you all, very helpful. Can I please pick you brains a little more, if there are any tax/maths experts out there.

Job 1:
annual salary 44962 + 8172 inner London supplement
tax code 1303L
taxable pay after pension = 3954
3954 - 1085 (my tax free allowance) = 2869
20% of 2869 = 573

Job 2:
Estimated income between now and 5/4/25 = 4320 - I have updated this on HMRC
Tax code BR

Job 1 after tax code change:
new tax code 1054LX
Taxable pay after pension remains at 3954
3954 - 878 (new tax free allowance for rest of tax period) = 3076
20% of 3076 = 615

so I can expect to pay £40 extra tax per month

job 2
tax code remains at BR

is the above correct? I am unclear where the 40% tax is being taken from.

thank you

molerat

They are reducing the tax free allowance on the main job so deducting more tax.  They don't have to deduct "40%" tax but enough to cover the necessary amount at whatever tax rate you pay.  All you need to do is work out your total taxable income from the 2 jobs, deduct £50730 which leaves the amount taxable at 40%.  That amount is already being taxed at 20% so you need to pay an extra 20% on it. They have done the sums and worked out they need to collect roughly (£13030 - £10540) / 12 x 20% = £41.50 for the next 5? months to cover that amount.  At the moment that is just an estimate and the actual situation will be looked at after the end of the tax year to see if they got it right, for instance in my case the notification reached the employer after I had been paid so I owed one of those extra deductions.

Nomunnofun1

molerat said:

They are reducing the tax free allowance on the main job so deducting more tax.  They don't have to deduct "40%" tax but enough to cover the necessary amount at whatever tax rate you pay.  All you need to do is work out your total taxable income from the 2 jobs, deduct £50730 which leaves the amount taxable at 40%.  That amount is already being taxed at 20% so you need to pay an extra 20% on it. They have done the sums and worked out they need to collect roughly (£13030 - £10540) / 12 x 20% = £41.50 for the next 5? months to cover that amount

Indeed - you type faster than me. HMRC have worked out the potential underpayment as a result of no income being taxed at 40% (when some should). They have attempted to recover this by reducing the personal allowance at the main source. 

greenglove

Thank you all so much, this now makes perfect sense and means I don’t need to spend hours on hold to HMRC to try to understand it! What a great forum. Thanks again.