HMRC Tax Code changes are on their way

Yellowbelly24

I current receive less than the tax threshold in nhs pension payments. I earned interest on my savings last tax year, so HMRC has lowered my tax code. A human right I’ve received a letter from my pension paymaster that I will now be paying tax. I phoned HMRC twice and they tell me I don’t have to pay tax on the interest but they have reduced my code to reflect the interest. And that even though the code is now below the threshold I shouldn’t pay tax. 

What should I do? 

eskbanker

Yellowbelly24 said:

I current receive less than the tax threshold in nhs pension payments. I earned interest on my savings last tax year, so HMRC has lowered my tax code. A human right I’ve received a letter from my pension paymaster that I will now be paying tax. I phoned HMRC twice and they tell me I don’t have to pay tax on the interest but they have reduced my code to reflect the interest. And that even though the code is now below the threshold I shouldn’t pay tax. 

What should I do? 

Not sure what you mean about human rights but what you describe is a known quirk of HMRC's processes and systems, where they (correctly) allocate your unused personal allowance to savings interest but do so in a way that alarms people into thinking that their personal allowance has actually been reduced!

No action needed unless you'd end up paying tax when you otherwise shouldn't have done, but if your earnings are below the personal allowance, or rather its reduced equivalent figure within your tax code, then you still won't be paying tax.

Dazed_and_C0nfused

Yellowbelly24 said:

I current receive less than the tax threshold in nhs pension payments. I earned interest on my savings last tax year, so HMRC has lowered my tax code. A human right I’ve received a letter from my pension paymaster that I will now be paying tax. I phoned HMRC twice and they tell me I don’t have to pay tax on the interest but they have reduced my code to reflect the interest. And that even though the code is now below the threshold I shouldn’t pay tax. 

What should I do? 

Can you confirm what the new tax code is and how much you expect to see on your P60 for the NHS pension for 2024-25?

What exactly has the pension paymaster told you?

GalacticaActual

Just checked the HMRC website and they have now calculated the tax which I owe for 6 April 2023 to 5 April 2024 - just over £600. I can make a separate payment to clear this amount or they'll start deducting it via my wages. I'm sure the HMRC website said it hadn't calculated the tax for that particular tax year when I last checked in February 🤷🏻‍♂️

This appears to be in addition to the £570 owed, which they are currently reclaiming this tax year via my wages.

They've actually issued a replacement tax code for the 2025/26 tax year. This isn't shown on my tax record yet but I have seen the coding notification on my employer's portal which was issued/created today, 24th March 2024.

Current tax code: K97 W1/M1
Tax code from 6 April 2025: 733L (issued February 2025)
Replacement tax code from 6 April 2025: 431L (issued 24th March 2025)

The HMRC website now seems to show Untaxed savings interest - this is new to me anyway, not seen it before. It's just a grand total, no breakdown per financial institution. I've blanked out the amounts below.

Thought I'd point this out as I'm sure other people have mentioned their 2023/24 figures hadn't been calculated yet and they may find they owe additional tax, like I've just found out! 😬

Dazed_and_C0nfused

GalacticaActual said:

Just checked the HMRC website and they have now calculated the tax which I owe for 6 April 2023 to 5 April 2024 - just over £600. I can make a separate payment to clear this amount or they'll start deducting it via my wages. I'm sure the HMRC website said it hadn't calculated the tax for that particular tax year when I last checked in February 🤷🏻‍♂️

This must be in addition to the £570 they are currently reclaiming this tax year.

They've actually issued a replacement tax code for the 2025/26 tax year. This isn't shown on my tax record yet but I have seen the coding notification on my employer's portal which was issued/created today, 24th March 2024.

Current tax code: K97 W1/M1
Tax code from 6 April 2025: 733L (issued February 2025)
Replacement tax code from 6 April 2025: 431L (issued 24th March 2025)

The HMRC website now seems to show Untaxed savings interest - this is new to me anyway, not seen it before. It's just a grand total, no breakdown per financial institution. I've blanked out the amounts below.

Thought I'd point this out as I'm sure other people have mentioned their 2023/24 figures hadn't been calculated yet and they may find they owe additional tax, like I've just found out! 😬

That seems new, have never seen information displayed like that before.

It probably won't make any difference when it comes to untaxed interest but Is that page specific to 2023-24, the current tax year or the forthcoming 2025-26 tax year?

Also, there is usually a page where you can view next year's tax code, in the PAYE section it's called Check next tax year.

GalacticaActual

Thanks for the reply. It's weird. Just tried to find the above new information page on my iPad but couldn't locate it. I can only access it on my Mac. I'm using Safari on both devices.

Have to click/tap on the Pay As You Earn (PAYE) as highlighted in blue below.
The URL briefly changes to:    journey . HMRC . gov . uk

When you click/tap Check current tax year, another screen appears and you can then view the information HMRC has about you.

There is a Beta notification at the bottom of the new web page.

Dazed_and_C0nfused

GalacticaActual said:

Thanks for the reply. It's weird. Just tried to find the above new information page on my iPad but couldn't locate it. I can only access it on my Mac. I'm using Safari on both devices.

Have to click/tap on the Pay As You Earn (PAYE) as highlighted in blue below.
The URL briefly changes to:    journey . HMRC . gov . uk

When you click/tap Check current tax year, another screen appears and you can then view the information HMRC has about you.

There is a Beta notification at the bottom of the new web page.

I haven't seen that page before either!

What happens when you choose the bottom link on that page - Check next tax year >

Can you not see details of the 431L tax code your employer has got?

GalacticaActual

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

Dazed_and_C0nfused

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 😉

gravel_2

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.