Adjusted tax code from HMRC

GadgetGuru

I was in a similar situation last year November. Received a tax bill for unpaid tax on interest, which I promptly paid online and cleared. 
I then receive a letter a week later with a change in tax code from my employment. 

I called HMRC and they told me that they get interest statements from the banks around Oct every year, hence why I got the tax bill for interest at that point.

I then said I didnt want my tax code to change - I like to see how much tax I will be paying on both my income and my interest as separate entities. He said that was fine and put my projected interest back to zero. By doing this my tax code went back to normal, and I will just get an unpaid tax bill at the end of the year again. 

He did say I would have to ring in every year to get them to zero the interest projection, but he would put a note on my account so the next time I call in the person knows exactly what to do.

This way I pay tax on my income with my normal tax code, and get an unpaid tax bill at the end of the year which covers the interest. 

sarah5770

Could someone help me understand my tax code. I received a letter from Inland Revenue in Jan to advise my tax code would change for 24/25  from 1257L to 1194L as I owed £94 tax from interest on savings, the interest was £1627, so £627 over the allowed £1000, then a couple of weeks later I received letter saying I owed £127.20 for tax year  23/24 which I paid. But then I have had another letter saying my tax code will change from C1147L and replaces C1083L. Letter says Personal allowance £12570 less untaxed interest, less adjustment for tax I owed for earlier year £473 so total tax-free amount will be £11470. Below is what shows for tax summary for 24/25 and 25/26.  I am confused as I have paid tax I owe for previous year. Do Inland Revenue base their tax code on the estimated amount I will earn from savings for 25/26 but I wonder if I receive less interest will the tax code change?

Calculated items	Current tax year ends 5 April 2025	Next tax year from 6 April 2025
Personal Allowance	£12,570	£12,570
Additions	£0	£0
Deductions	−£627	−£1,100
Your total tax-free amount	£11,943	£11,470

Breakdown of deductions

Deduction	Current tax year ends 5 April 2025	Next tax year from 6 April 2025
Untaxed interest on savings and investments	£627	£627
Underpayment from previous year	Not applicable	£473
Total deductions	£627	£1,100

Dazed_and_C0nfused

sarah5770 said:

Could someone help me understand my tax code. I received a letter from Inland Revenue in Jan to advise my tax code would change for 24/25  from 1257L to 1194L as I owed £94 tax from interest on savings, the interest was £1627, so £627 over the allowed £1000, then a couple of weeks later I received letter saying I owed £127.20 for tax year  23/24 which I paid. But then I have had another letter saying my tax code will change from C1147L and replaces C1083L. Letter says Personal allowance £12570 less untaxed interest, less adjustment for tax I owed for earlier year £473 so total tax-free amount will be £11470. Below is what shows for tax summary for 24/25 and 25/26.  I am confused as I have paid tax I owe for previous year. Do Inland Revenue base their tax code on the estimated amount I will earn from savings for 25/26 but I wonder if I receive less interest will the tax code change?

Calculated items	Current tax year ends 5 April 2025	Next tax year from 6 April 2025
Personal Allowance	£12,570	£12,570
Additions	£0	£0
Deductions	−£627	−£1,100
Your total tax-free amount	£11,943	£11,470

Breakdown of deductions

Deduction	Current tax year ends 5 April 2025	Next tax year from 6 April 2025
Untaxed interest on savings and investments	£627	£627
Underpayment from previous year	Not applicable	£473
Total deductions	£627	£1,100

You have misunderstood two things.

The change to C1194L was only to start collecting tax on the (estimated) interest for 2024-25.

The £94 is not being collected during 2024-25, there is no deduction in the 2024-25 code to collect it.

The £473 in the 2025-26 code is the tax code deduction needed to collect the (estimated) amount owed for 2024-25.

£473 x 20% = £94.60

At the moment HMRC will normally use the 2023-24 interest information when calculating tax codes for 2024-25 and 2025-26.  They are unlikely to get the actual figures for 2024-25 until June 2025.

sarah5770

Thanks for your reply. 

Does anyone know how I can get a written copy of my tax codes for next week, I have had several letters in last few weeks with several changes of tax code and I would like a written copy rather than the one I can see on line but can't see a way to contact HMRC and the digital assistant keeps saying it doesn't understand my request.

molerat

You have letters ?

Print off the one on line ?

HMRC are not going to send you another one.

sheramber

sarah5770 said:

Thanks for your reply. 

Does anyone know how I can get a written copy of my tax codes for next week, I have had several letters in last few weeks with several changes of tax code and I would like a written copy rather than the one I can see on line but can't see a way to contact HMRC and the digital assistant keeps saying it doesn't understand my request.

Phone them as so is as lines open or join the queue  later in the day.

Can you not print off a copy?

sarah5770

Can I check that I have understood correctly that for tax purposes Inland Revenue presume that I will have the same amount of interest for 25/26 as previous year i.e I had £1627 interest last year so that would be £627 over the allowed amount, as it looks that way from my tax code. But I wondered should they be as I may spend some of the savings or the interest rates will be lower so the amount I receive could be lower??

molerat

Yes, that is the way they work.  But if you know the total interest for the year will be lower you can adjust it down and they will change the code accordingly.

Sarahspangles

sarah5770 said:

Can I check that I have understood correctly that for tax purposes Inland Revenue presume that I will have the same amount of interest for 25/26 as previous year i.e I had £1627 interest last year so that would be £627 over the allowed amount, as it looks that way from my tax code. But I wondered should they be as I may spend some of the savings or the interest rates will be lower so the amount I receive could be lower??

I think it was Dazed_and_C0nfused who finally helped me ‘get’ this! Your PAYE notice of coding is an attempt to deduct the correct amount of tax for the current year, but it’s only ever provisional until after the end of the tax year when all relevant income and allowances have been finalised.

HMRC have to go on what they know and a reasonable starting point is that your salary and savings interest will remain the same. As the year progresses they may adjust your notice of coding on the basis of new information. You can amend some of the information yourself in your HMRC a personal tax account.

If the amount collected through PAYE is not correct then you would get a P800 after the end of the tax year inviting you to claim a refund or making arrangements to recover underpaid tax.