HMRC Tax Code changes are on their way

Hoenir

Presumably that's for last tax year. You will also owe for this. 

Sarahspangles

forumquery said:

I have received a letter from HMRC advising £356 estimated tax I owe this year which I assume to be for savings account interest. To obtain this money they are reducing my code by £6028, as a basic rate tax payer I calculate this will increase the tax I pay by just over £1200, where am I going wrong? 

Does your tax code include extra letters, e.g. an X means you are taxed after deducting one one-twelfth of the allowance each month. It has the effect of preventing too much being taken in one go when there is a mid-year adjustment, but it does mean the reduction looks large. It isn’t because you’re never paying twelve-month’s worth at that rate.

molerat

AAAAAAARRRRRGGGGGHHHHH

After reading this I have just checked my code.  It had changed to a lower number with an X suffix dated yeaterday.   23-24 is still showing as not sorted and nothing was showing as to why.  Digging deeper they had suddenly decided that my £2880 in £3600, £2700 taxable, out HL SIPP was going to pay me £10859 this year when I made the transaction last June.  Changed it back and will wait and see what happens.  Luckily my payday from this source is mid month so Jan has been and a few weeks to go to Feb so it should be sorted by then. I seem to remember they did the same last year.  Just makes more admin for my main pension as they have to change the code then back again.

Dazed_and_C0nfused

forumquery said:

I have received a letter from HMRC advising £356 estimated tax I owe this year which I assume to be for savings account interest. To obtain this money they are reducing my code by £6028, as a basic rate tax payer I calculate this will increase the tax I pay by just over £1200, where am I going wrong? 

What you are (hopefully) overlooking is that the new tax code will only be operated on a non cumulative basis.

So it will be used each pay/pension day from now until the end of the tax year but without considering what happened earlier in the tax year.

So although it is a large deduction it will only impact you for 3-4 months of the tax year.  It would only result in an extra £1,200 tax if it was used for a whole tax year (for a basic rate payer).

gravel_2

So I got my new code for 24/25. I can't tell if this is the recovery of 23/24 interest or an estimate for 24/25. I think it's 23/24 but my tax summary for that year lists substantially lower interest than earned.

Is it possible they have done these out of order (even though an estimate for 24/25 would need to be based on 23/25 numbers...)? Should I expect a further tax code change for 23/24 recovery or will they come looking for a lump sum?

InvesterJones

gravel_2 said:

So I got my new code for 24/25. I can't tell if this is the recovery of 23/24 interest or an estimate for 24/25. I think it's 23/24 but my tax summary for that year lists substantially lower interest than earned.

Read the notes, it'll tell you what part is recovery of previous years tax owed and what part is estimated tax owed for current year.

eskbanker

gravel_2 said:

So I got my new code for 24/25. I can't tell if this is the recovery of 23/24 interest or an estimate for 24/25. I think it's 23/24 but my tax summary for that year lists substantially lower interest than earned.

Is it possible they have done these out of order (even though an estimate for 24/25 would need to be based on 23/25 numbers...)? Should I expect a further tax code change for 23/24 recovery or will they come looking for a lump sum?

The norm is that changes to the current year relate to an estimate of this year's interest, whereas recovery of underpaid tax for a previous year will skip a year.

In other words, a change to 2024/25 coding will be based on what they estimate you'll receive, on the assumption that this will be similar to 2023/24.

Any underpaid tax from 2023/24 should be collected via an adjustment to 2025/26 coding.

Even though they may not yet have issued your statement for 2023/24, this isn't a prerequisite for adjusting 2024/25 coding....

gravel_2

I think my situation is slightly unusual in that up to 22/23 I did SA (including over PSA interest income) and have since pulled out of SA due to no longer pursuing freelance income. This seems to have submitted a SA on my behalf with zeros across the board, including for interest income. Hoping it all comes out in the wash...

eskbanker said:

gravel_2 said:

So I got my new code for 24/25. I can't tell if this is the recovery of 23/24 interest or an estimate for 24/25. I think it's 23/24 but my tax summary for that year lists substantially lower interest than earned.

Is it possible they have done these out of order (even though an estimate for 24/25 would need to be based on 23/25 numbers...)? Should I expect a further tax code change for 23/24 recovery or will they come looking for a lump sum?

The norm is that changes to the current year relate to an estimate of this year's interest, whereas recovery of underpaid tax for a previous year will skip a year.

In other words, a change to 2024/25 coding will be based on what they estimate you'll receive, on the assumption that this will be similar to 2023/24.

Any underpaid tax from 2023/24 should be collected via an adjustment to 2025/26 coding.

Even though they may not yet have issued your statement for 2023/24, this isn't a prerequisite for adjusting 2024/25 coding....

Thanks. So now I'm in this PAYE/interest income cycle of estimated annual interest, 25/26 may be a "double dip" year where both 23/24 actuals and 25/26 estimates are collected? Triple dip if 24/25 actuals exceed the estimate?

InvesterJones said:

gravel_2 said:

So I got my new code for 24/25. I can't tell if this is the recovery of 23/24 interest or an estimate for 24/25. I think it's 23/24 but my tax summary for that year lists substantially lower interest than earned.

Read the notes, it'll tell you what part is recovery of previous years tax owed and what part is estimated tax owed for current year.

Nothing listed as recovery, only an estimate for 24/25. My PAYE summary for 23/24 includes interest of ~£200 (after PSA) but that seems to be an estimate based on 22/23 SA numbers.

VNX

Sunshine_and_Roses said:

Sunshine_and_Roses said:

Hope someone can advise.  I have received a new tax code for 2025 which I questioned with HMRC, they said they base it on a guesstimate of previous year's interest earnings.  We went through my accounts, most of which were fixed savings then balance moved to various ISA on maturity.  My tax code was then adjusted back to 1257.

I then received a tax calculation for tax year 2023/2024 saying I had £7080 in untaxed interest, and owed HMRC £326.  As most of my savings are now in Premium Bonds or ISA, with old fixed rate accounts closed, how can I check the actual amount of interest earned that year?  I did start to 'ladder save' on some 1, 2 and 3 year fixed accounts and unsure how they calculate interest with those. 

£7000 of interest would have meant I had £150,000 in ordinary savings accounts at rates between 4% and 5%, which I know I did not have.

Is there an easy way of doing this or is it a trawl through all closed accounts?  Thanks.

I have spoken to HMRC who were really helpful.  I wrongly thought that the fixed 'ladder savings' I did over three years would have the interest calculated on maturity, rather than each tax year.  I opened a number of these at the end of 2022 when the interest rate had increased.  Lesson learnt.

** Edit - after checking the account details that HMRC gave me, it appears that Santander have included my Mum's accounts that I have POA for.  I have spoken to Santander who admitted their error and will readjust figures for HMRC.  That should now take me back under the tax threshold.

I know this argument has been had a million times but on fixed bonds tax on interest is meant to be in the tax year the interest arises I.e when you can access it, is this not the case?

eskbanker

gravel_2 said:

I think my situation is slightly unusual in that up to 22/23 I did SA (including over PSA interest income) and have since pulled out of SA due to no longer pursuing freelance income. This seems to have submitted a SA on my behalf with zeros across the board, including for interest income. Hoping it all comes out in the wash...

eskbanker said:

gravel_2 said:

So I got my new code for 24/25. I can't tell if this is the recovery of 23/24 interest or an estimate for 24/25. I think it's 23/24 but my tax summary for that year lists substantially lower interest than earned.

Is it possible they have done these out of order (even though an estimate for 24/25 would need to be based on 23/25 numbers...)? Should I expect a further tax code change for 23/24 recovery or will they come looking for a lump sum?

The norm is that changes to the current year relate to an estimate of this year's interest, whereas recovery of underpaid tax for a previous year will skip a year.

In other words, a change to 2024/25 coding will be based on what they estimate you'll receive, on the assumption that this will be similar to 2023/24.

Any underpaid tax from 2023/24 should be collected via an adjustment to 2025/26 coding.

Even though they may not yet have issued your statement for 2023/24, this isn't a prerequisite for adjusting 2024/25 coding....

Thanks. So now I'm in this PAYE/interest income cycle of estimated annual interest, 25/26 may be a "double dip" year where both 23/24 actuals and 25/26 estimates are collected? Triple dip if 24/25 actuals exceed the estimate?

Potentially double dip, but not triple - if you owe more for 2024/25 then that wouldn't normally be collected until 2026/27.