HMRC Tax Code changes are on their way

Dazed_and_C0nfused

gravel_2 said:

Is there a way to find out, without having to call, how an underpayment has been calculated? They have me next year recovering £4,800 in previous year underpayment and have cut my personal allowance down to £4,799 (-£7,771) but I cannot work out why. My interest income does not seem to justify it. In fact, my interest from 23/24 seems to already be account for by an earlier tax code change (-£2,616, which amounts to my interest earnings for that year less the PSA).

I will tally up my interest for 24/25, which I expect to be slightly less than the previous year, and then call them if I have to in April. Just can't make sense of it.

My only other earnings are PAYE so those should not be far off.

I think you have misunderstood what's happening.

They have me next year recovering £4,800 in previous year underpayment 

I suspect what you mean is that your tax code allowances have been reduced by 4,800 to collect some tax owed.  The tax owed is likely to be either £960, if you are a basic rate payer (4800 x 20%) or £1,920 if you are a higher rate payer (4800 x 40%).  But it could be between the two if straddle basic and higher rates.

That doesn't alter your Personal Allowance, the only things that change that are applying for Marriage Allowance or having adjusted net income above £100k.

You should get a calculation letter (P800) detailing the tax owed.  You might be able to see an online version but I don't know how detailed that is.  The previous poster shared a screenshot showing 6 April 2023 to 5 April 2024 with what looked like a link to view more details.  Do you have anything like that in your Personal Tax Account?

gravel_2

Dazed_and_C0nfused said:

gravel_2 said:

Is there a way to find out, without having to call, how an underpayment has been calculated? They have me next year recovering £4,800 in previous year underpayment and have cut my personal allowance down to £4,799 (-£7,771) but I cannot work out why. My interest income does not seem to justify it. In fact, my interest from 23/24 seems to already be account for by an earlier tax code change (-£2,616, which amounts to my interest earnings for that year less the PSA).

I will tally up my interest for 24/25, which I expect to be slightly less than the previous year, and then call them if I have to in April. Just can't make sense of it.

My only other earnings are PAYE so those should not be far off.

I think you have misunderstood what's happening.

They have me next year recovering £4,800 in previous year underpayment 

I suspect what you mean is that your tax code allowances have been reduced by 4,800 to collect some tax owed.  The tax owed is likely to be either £960, if you are a basic rate payer (4800 x 20%) or £1,920 if you are a higher rate payer (4800 x 40%).  But it could be between the two if straddle basic and higher rates.

That doesn't alter your Personal Allowance, the only things that change that are applying for Marriage Allowance or having adjusted net income above £100k.

You should get a calculation letter (P800) detailing the tax owed.  You might be able to see an online version but I don't know how detailed that is.  The previous poster shared a screenshot showing 6 April 2023 to 5 April 2024 with what looked like a link to view more details.  Do you have anything like that in your Personal Tax Account?

To clarify - my tax code is now S479L.

The deduction of £7,771 seems to be:
£355 medical (expected)
£2,616 untaxed interest (wrong but not majorly, this will come out in the wash)
£4,800 unexplained "underpayment from previous year".

Dazed_and_C0nfused

gravel_2 said:

Dazed_and_C0nfused said:

gravel_2 said:

Is there a way to find out, without having to call, how an underpayment has been calculated? They have me next year recovering £4,800 in previous year underpayment and have cut my personal allowance down to £4,799 (-£7,771) but I cannot work out why. My interest income does not seem to justify it. In fact, my interest from 23/24 seems to already be account for by an earlier tax code change (-£2,616, which amounts to my interest earnings for that year less the PSA).

I will tally up my interest for 24/25, which I expect to be slightly less than the previous year, and then call them if I have to in April. Just can't make sense of it.

My only other earnings are PAYE so those should not be far off.

I think you have misunderstood what's happening.

They have me next year recovering £4,800 in previous year underpayment 

I suspect what you mean is that your tax code allowances have been reduced by 4,800 to collect some tax owed.  The tax owed is likely to be either £960, if you are a basic rate payer (4800 x 20%) or £1,920 if you are a higher rate payer (4800 x 40%).  But it could be between the two if straddle basic and higher rates.

That doesn't alter your Personal Allowance, the only things that change that are applying for Marriage Allowance or having adjusted net income above £100k.

You should get a calculation letter (P800) detailing the tax owed.  You might be able to see an online version but I don't know how detailed that is.  The previous poster shared a screenshot showing 6 April 2023 to 5 April 2024 with what looked like a link to view more details.  Do you have anything like that in your Personal Tax Account?

To clarify - my tax code is now S479L.

The deduction of £7,771 seems to be:
£355 medical (expected)
£2,616 untaxed interest (wrong but not majorly, this will come out in the wash)
£4,800 unexplained "underpayment from previous year".

That isn't an underpayment amount, it's the tax code deduction needed to collect a smaller amount of tax.  

As you are subject to the numerous Scottish rates it's trickier to know how much the underpayment is but there should be somewhere online or on the tax code notice if it's a paper one that explains the amount of tax actually owed.

GalacticaActual

Dazed_and_C0nfused said:

GalacticaActual said:

Yes, it shows the 431L tax code in that new section. Thanks for pointing that out. 

Great!

Tax code from 6 April 2025: 733L (issued February 2025)

Replacement tax code from 6 April 2025: 431L (issued 24th March 2025)

So that drop from 733L to 431L ties in with you owing £604.40 and being a basic rate payer.

A drop in tax code allowances of £3,022 will mean your employer deducts 20% extra tax on that amount of your earnings in 2025:26

£3,022 x 20% = £604.40

So if you pay the £604.40 direct to HMRC your code should revert back to 733L (for 2025:26).  Although that's not particularly MSE as you are missing out on an interest free loan from HMRC and that £604.40 could be earning you even more interest 😉

Thanks for the explanation, @Dazed_and_C0nfused, I understand now what will happen from 6 April.

I was thinking along the same lines about letting HMRC reclaim the underpaid tax via my wages over the course of the next tax year rather than paying it in full now! 

HMRC said it would all be explained in the letter they're sending me. Whether that's a demand for payment letter or just a general tax code notification letter, I will probably find out in the next week or so when it arrives.

gravel_2

Dazed_and_C0nfused said:

gravel_2 said:

Dazed_and_C0nfused said:

gravel_2 said:

Is there a way to find out, without having to call, how an underpayment has been calculated? They have me next year recovering £4,800 in previous year underpayment and have cut my personal allowance down to £4,799 (-£7,771) but I cannot work out why. My interest income does not seem to justify it. In fact, my interest from 23/24 seems to already be account for by an earlier tax code change (-£2,616, which amounts to my interest earnings for that year less the PSA).

I will tally up my interest for 24/25, which I expect to be slightly less than the previous year, and then call them if I have to in April. Just can't make sense of it.

My only other earnings are PAYE so those should not be far off.

I think you have misunderstood what's happening.

They have me next year recovering £4,800 in previous year underpayment 

I suspect what you mean is that your tax code allowances have been reduced by 4,800 to collect some tax owed.  The tax owed is likely to be either £960, if you are a basic rate payer (4800 x 20%) or £1,920 if you are a higher rate payer (4800 x 40%).  But it could be between the two if straddle basic and higher rates.

That doesn't alter your Personal Allowance, the only things that change that are applying for Marriage Allowance or having adjusted net income above £100k.

You should get a calculation letter (P800) detailing the tax owed.  You might be able to see an online version but I don't know how detailed that is.  The previous poster shared a screenshot showing 6 April 2023 to 5 April 2024 with what looked like a link to view more details.  Do you have anything like that in your Personal Tax Account?

To clarify - my tax code is now S479L.

The deduction of £7,771 seems to be:
£355 medical (expected)
£2,616 untaxed interest (wrong but not majorly, this will come out in the wash)
£4,800 unexplained "underpayment from previous year".

That isn't an underpayment amount, it's the tax code deduction needed to collect a smaller amount of tax.  

As you are subject to the numerous Scottish rates it's trickier to know how much the underpayment is but there should be somewhere online or on the tax code notice if it's a paper one that explains the amount of tax actually owed.

Understand this is an adjustment in order to recover tax and not the amount being recovered.

As my only income sources are PAYE and interest, and PAYE should in theory be correct, the income tax rate applicable will be 40%, not one of the Scottish rates. This then suggests the underpayment is £1,920.

HMRC has separately informed me that they believe I underpaid £1,777.60 (which would require an adjustment of £2,944‬ to recover).

eskbanker

gravel_2 said:

Dazed_and_C0nfused said:

gravel_2 said:

Dazed_and_C0nfused said:

gravel_2 said:

Is there a way to find out, without having to call, how an underpayment has been calculated? They have me next year recovering £4,800 in previous year underpayment and have cut my personal allowance down to £4,799 (-£7,771) but I cannot work out why. My interest income does not seem to justify it. In fact, my interest from 23/24 seems to already be account for by an earlier tax code change (-£2,616, which amounts to my interest earnings for that year less the PSA).

I will tally up my interest for 24/25, which I expect to be slightly less than the previous year, and then call them if I have to in April. Just can't make sense of it.

My only other earnings are PAYE so those should not be far off.

I think you have misunderstood what's happening.

They have me next year recovering £4,800 in previous year underpayment 

I suspect what you mean is that your tax code allowances have been reduced by 4,800 to collect some tax owed.  The tax owed is likely to be either £960, if you are a basic rate payer (4800 x 20%) or £1,920 if you are a higher rate payer (4800 x 40%).  But it could be between the two if straddle basic and higher rates.

That doesn't alter your Personal Allowance, the only things that change that are applying for Marriage Allowance or having adjusted net income above £100k.

You should get a calculation letter (P800) detailing the tax owed.  You might be able to see an online version but I don't know how detailed that is.  The previous poster shared a screenshot showing 6 April 2023 to 5 April 2024 with what looked like a link to view more details.  Do you have anything like that in your Personal Tax Account?

To clarify - my tax code is now S479L.

The deduction of £7,771 seems to be:
£355 medical (expected)
£2,616 untaxed interest (wrong but not majorly, this will come out in the wash)
£4,800 unexplained "underpayment from previous year".

That isn't an underpayment amount, it's the tax code deduction needed to collect a smaller amount of tax.  

As you are subject to the numerous Scottish rates it's trickier to know how much the underpayment is but there should be somewhere online or on the tax code notice if it's a paper one that explains the amount of tax actually owed.

Understand this is an adjustment in order to recover tax and not the amount being recovered.

As my only income sources are PAYE and interest, and PAYE should in theory be correct, the income tax rate applicable will be 40%, not one of the Scottish rates. This then suggests the underpayment is £1,920.

HMRC has separately informed me that they believe I underpaid £1,777.60 (which would require an adjustment of £2,944‬ to recover).

Surely recovery of £1,777.60 from a 40% taxpayer would require an adjustment of £1,777.60 / 40% = £4,444?

gravel_2

eskbanker said:

gravel_2 said:

Dazed_and_C0nfused said:

gravel_2 said:

Dazed_and_C0nfused said:

gravel_2 said:

Is there a way to find out, without having to call, how an underpayment has been calculated? They have me next year recovering £4,800 in previous year underpayment and have cut my personal allowance down to £4,799 (-£7,771) but I cannot work out why. My interest income does not seem to justify it. In fact, my interest from 23/24 seems to already be account for by an earlier tax code change (-£2,616, which amounts to my interest earnings for that year less the PSA).

I will tally up my interest for 24/25, which I expect to be slightly less than the previous year, and then call them if I have to in April. Just can't make sense of it.

My only other earnings are PAYE so those should not be far off.

I think you have misunderstood what's happening.

They have me next year recovering £4,800 in previous year underpayment 

I suspect what you mean is that your tax code allowances have been reduced by 4,800 to collect some tax owed.  The tax owed is likely to be either £960, if you are a basic rate payer (4800 x 20%) or £1,920 if you are a higher rate payer (4800 x 40%).  But it could be between the two if straddle basic and higher rates.

That doesn't alter your Personal Allowance, the only things that change that are applying for Marriage Allowance or having adjusted net income above £100k.

You should get a calculation letter (P800) detailing the tax owed.  You might be able to see an online version but I don't know how detailed that is.  The previous poster shared a screenshot showing 6 April 2023 to 5 April 2024 with what looked like a link to view more details.  Do you have anything like that in your Personal Tax Account?

To clarify - my tax code is now S479L.

The deduction of £7,771 seems to be:
£355 medical (expected)
£2,616 untaxed interest (wrong but not majorly, this will come out in the wash)
£4,800 unexplained "underpayment from previous year".

That isn't an underpayment amount, it's the tax code deduction needed to collect a smaller amount of tax.  

As you are subject to the numerous Scottish rates it's trickier to know how much the underpayment is but there should be somewhere online or on the tax code notice if it's a paper one that explains the amount of tax actually owed.

Understand this is an adjustment in order to recover tax and not the amount being recovered.

As my only income sources are PAYE and interest, and PAYE should in theory be correct, the income tax rate applicable will be 40%, not one of the Scottish rates. This then suggests the underpayment is £1,920.

HMRC has separately informed me that they believe I underpaid £1,777.60 (which would require an adjustment of £2,944‬ to recover).

Surely recovery of £1,777.60 from a 40% taxpayer would require an adjustment of £1,777.60 / 40% = £4,444?

Sorry I keep mistyping this for some reason, even in my own calculator. My underpayment is £1,177.60.

Dazed_and_C0nfused

gravel_2 said:

Dazed_and_C0nfused said:

gravel_2 said:

Dazed_and_C0nfused said:

gravel_2 said:

Is there a way to find out, without having to call, how an underpayment has been calculated? They have me next year recovering £4,800 in previous year underpayment and have cut my personal allowance down to £4,799 (-£7,771) but I cannot work out why. My interest income does not seem to justify it. In fact, my interest from 23/24 seems to already be account for by an earlier tax code change (-£2,616, which amounts to my interest earnings for that year less the PSA).

I will tally up my interest for 24/25, which I expect to be slightly less than the previous year, and then call them if I have to in April. Just can't make sense of it.

My only other earnings are PAYE so those should not be far off.

I think you have misunderstood what's happening.

They have me next year recovering £4,800 in previous year underpayment 

I suspect what you mean is that your tax code allowances have been reduced by 4,800 to collect some tax owed.  The tax owed is likely to be either £960, if you are a basic rate payer (4800 x 20%) or £1,920 if you are a higher rate payer (4800 x 40%).  But it could be between the two if straddle basic and higher rates.

That doesn't alter your Personal Allowance, the only things that change that are applying for Marriage Allowance or having adjusted net income above £100k.

You should get a calculation letter (P800) detailing the tax owed.  You might be able to see an online version but I don't know how detailed that is.  The previous poster shared a screenshot showing 6 April 2023 to 5 April 2024 with what looked like a link to view more details.  Do you have anything like that in your Personal Tax Account?

To clarify - my tax code is now S479L.

The deduction of £7,771 seems to be:
£355 medical (expected)
£2,616 untaxed interest (wrong but not majorly, this will come out in the wash)
£4,800 unexplained "underpayment from previous year".

That isn't an underpayment amount, it's the tax code deduction needed to collect a smaller amount of tax.  

As you are subject to the numerous Scottish rates it's trickier to know how much the underpayment is but there should be somewhere online or on the tax code notice if it's a paper one that explains the amount of tax actually owed.

Understand this is an adjustment in order to recover tax and not the amount being recovered.

As my only income sources are PAYE and interest, and PAYE should in theory be correct, the income tax rate applicable will be 40%, not one of the Scottish rates. This then suggests the underpayment is £1,920.

HMRC has separately informed me that they believe I underpaid £1,777.60 (which would require an adjustment of £2,944‬ to recover).

Ok so the underpayment is really £1,177.60.

But as you have a Scottish tax code the relevant tax rate can't be 40% as employers/pension payers don't deduct tax at 40% when a Scottish tax code is in place.

The rates for PAYE tax deductions are 19, 20, 21, 42, 45 and 48%.

gravel_2

Dazed_and_C0nfused said:

gravel_2 said:

Dazed_and_C0nfused said:

gravel_2 said:

Dazed_and_C0nfused said:

gravel_2 said:

Is there a way to find out, without having to call, how an underpayment has been calculated? They have me next year recovering £4,800 in previous year underpayment and have cut my personal allowance down to £4,799 (-£7,771) but I cannot work out why. My interest income does not seem to justify it. In fact, my interest from 23/24 seems to already be account for by an earlier tax code change (-£2,616, which amounts to my interest earnings for that year less the PSA).

I will tally up my interest for 24/25, which I expect to be slightly less than the previous year, and then call them if I have to in April. Just can't make sense of it.

My only other earnings are PAYE so those should not be far off.

I think you have misunderstood what's happening.

They have me next year recovering £4,800 in previous year underpayment 

I suspect what you mean is that your tax code allowances have been reduced by 4,800 to collect some tax owed.  The tax owed is likely to be either £960, if you are a basic rate payer (4800 x 20%) or £1,920 if you are a higher rate payer (4800 x 40%).  But it could be between the two if straddle basic and higher rates.

That doesn't alter your Personal Allowance, the only things that change that are applying for Marriage Allowance or having adjusted net income above £100k.

You should get a calculation letter (P800) detailing the tax owed.  You might be able to see an online version but I don't know how detailed that is.  The previous poster shared a screenshot showing 6 April 2023 to 5 April 2024 with what looked like a link to view more details.  Do you have anything like that in your Personal Tax Account?

To clarify - my tax code is now S479L.

The deduction of £7,771 seems to be:
£355 medical (expected)
£2,616 untaxed interest (wrong but not majorly, this will come out in the wash)
£4,800 unexplained "underpayment from previous year".

That isn't an underpayment amount, it's the tax code deduction needed to collect a smaller amount of tax.  

As you are subject to the numerous Scottish rates it's trickier to know how much the underpayment is but there should be somewhere online or on the tax code notice if it's a paper one that explains the amount of tax actually owed.

Understand this is an adjustment in order to recover tax and not the amount being recovered.

As my only income sources are PAYE and interest, and PAYE should in theory be correct, the income tax rate applicable will be 40%, not one of the Scottish rates. This then suggests the underpayment is £1,920.

HMRC has separately informed me that they believe I underpaid £1,777.60 (which would require an adjustment of £2,944‬ to recover).

Ok so the underpayment is really £1,177.60.

But as you have a Scottish tax code the relevant tax rate can't be 40% as employers/pension payers don't deduct tax at 40% when a Scottish tax code is in place.

The rates for PAYE tax deductions are 19, 20, 21, 42, 45 and 48%.

Okay, if I am following you correctly and assuming that all of my underpayment relates to interest earnings and not PAYE...

The underpayment figure being £4,800, and me being taxed at 45% rate, the amount being recovered in 25/26 by this particular tax code adjustment is 45%*£4,800 or £2,160.

Applying then the 40% tax rate in reverse that should have applied to the interest earnings this would mean they are working with a figure of £5,400 earned in interest that has not been taxed correctly (or rather £6,100 total earned from unwrapped savings, accounting for PSA)?

Is that right?

This takes me even further from understanding what HMRC is doing, but does help me (hopefully) understand how they are doing it.

SavingsBoo

Is anyone else still waiting for a 2023/24 update on their tax account?  The tile on the front page states that 'You paid the right amount of income tax for 6 April 2023 to 5 April 2024' (and my tax code hasn't changed) but under the Annual Tax Summary tile, 2023/24 only shows as '2023 to 2024 for a general  Annual Tax Summary'.  

2022 to 2023 does take me through to a taxable income summary which lists Employment and Other income (including interest) although the latter figure doesn't match my own records of interest earned in 2022/23 which should have taken me just over the £1k personal savings allowance.