Tax Code Change Query

RG2015

My tax code for this year has just been changed and the HMRC information is not very helpful. I have shown a screenshot of the details below.

I understand the change from £60 to £305 for untaxed interest although I disagree with it. I told them last year my 24/25 interest would be £1,060 and they used £60 as the excess that would be taxed. 

However, my actual 23/24 interest was £1,301 and I imagine they have received a figure of £1,305 for 23/24, and applied this to 24/25.

The figure I don’t understand is the £34 estimated underpayment. Any thoughts as to where this may have come from would be very welcome.

eskbanker

Are those clickable links or did you change the colour and underline?

RG2015

eskbanker said:

Are those clickable links or did you change the colour and underline?

Yes, they are clickable, but the £34 drill down is not particularly helpful. It was £36 on the first page yesterday and changed to £34 today. The drill down has stayed at yesterday’s £36.

RG2015

I have checked my taxable income to date using a monthly allowance of £189 (£2,269 / 12), and I have paid exactly the right amount of tax from April to December.

Hence the £34 underpayment is a complete mystery to me.

[Deleted User]

At a guess: 

£60 previously included as interest over £1000
£305 is revised figure
£245 is difference 
Tax due on £245 is £48.90
This was not collected over previous nine months of tax year - £48.90 x 9/12 is £36.68

RG2015

[Deleted User] said:

At a guess: 

£60 previously included as interest over £1000
£305 is revised figure
£245 is difference 
Tax due on £245 is £48.90
This was not collected over previous nine months of tax year - £48.90 x 9/12 is £36.68

Thanks [Deleted User],

I like your thinking, but assumed that the £60 to £305 was already included on its own line.

You may be right but these are my initial thoughts.

£714 was there when the figure was £36 and I surmised the following.

A calculated notional annual amount of £714 x 20% tax = £142.80

Divide by 4 to collect this in the 3 months Jan to Mar.

£142.80 / 4 = £35.70

So it still doesn't explain where the £34 or £36 figure came from.

Why does it have to be so anti-intuitive and non-transparent!

molerat

Unfortunately the calculation often does not make sense as it is fudged to achieve the correct outcome, fairly transparent at the start of the year but not so 3/4 of the way through.  The only real way is to work out how much tax is due in the year and how much all these changes will collect over the year.

RG2015

molerat said:

Unfortunately the calculation often does not make sense as it is fudged to achieve the correct outcome, fairly transparent at the start of the year but not so 3/4 of the way through.  The only real way is to work out how much tax is due in the year and how much all these changes will collect over the year.

I understand the fudging but the £36 seems to have come out of nowhere, unless  [Deleted User] is correct.

At the very least HMRC should give some indication where the £34 comes from.

Even the move from £60 to £305 is not explained. I only surmised this from my high degree of knowledge of my figures and their methods of using previous years to estimate future years (whilst overriding the correct figure I had already given them with full details of every bank and BS).

[Deleted User]

RG2015 said:

[Deleted User] said:

At a guess: 

£60 previously included as interest over £1000
£305 is revised figure
£245 is difference 
Tax due on £245 is £48.90
This was not collected over previous nine months of tax year - £48.90 x 9/12 is £36.68

Thanks [Deleted User],

I like your thinking, but assumed that the £60 to £305 was already included on its own line.

You may be right but these are my initial thoughts.

£714 was there when the figure was £36 and I surmised the following.

A calculated notional annual amount of £714 x 20% tax = £142.80

Divide by 4 to collect this in the 3 months Jan to Mar.

£142.80 / 4 = £35.70

So it still doesn't explain where the £34 or £36 figure came from.

Why does it have to be so anti-intuitive and non-transparent!

It’s the same calculation. 

As at 31st December you were £36 odd underpaid as per my original post. The new code should have been applied since April. It wasn’t and you are underpaid. 

Your code has been adjusted by 714 to collect this over three months in order to balance out the year. 

£714 @ 20% /4 is, as you say, £35.70. 

RG2015

[Deleted User] said:

RG2015 said:

[Deleted User] said:

At a guess: 

£60 previously included as interest over £1000
£305 is revised figure
£245 is difference 
Tax due on £245 is £48.90
This was not collected over previous nine months of tax year - £48.90 x 9/12 is £36.68

Thanks [Deleted User],

I like your thinking, but assumed that the £60 to £305 was already included on its own line.

You may be right but these are my initial thoughts.

£714 was there when the figure was £36 and I surmised the following.

A calculated notional annual amount of £714 x 20% tax = £142.80

Divide by 4 to collect this in the 3 months Jan to Mar.

£142.80 / 4 = £35.70

So it still doesn't explain where the £34 or £36 figure came from.

Why does it have to be so anti-intuitive and non-transparent!

It’s the same calculation. 

As at 31st December you were £36 odd underpaid as per my original post. The new code should have been applied since April. It wasn’t and you are underpaid. 

Your code has been adjusted by 714 to collect this over three months in order to balance out the year. 

£714 @ 20% /4 is, as you say, £35.70. 

Thank you  [Deleted User],

I do believe I have got it!

The £714 adjustment is the year to date underpayment of £36.

And the £60 to £305 adjustment is for the Q1 2025 shortfall of £12.