Untaxed interest

SJS5

Hi struggling to get my head round my tax code letter that I received today.
It states I have £2571 in untaxed interest. 
My previous tax code was 1302L which is used mostly against my pension which is £13k a year.

I also work part time .


My tax code has now altered to 1002L X

 Is this new tax code just calculated by taking 2571 from 1302 roughly.
So in effect from April I will start paying more tax on my pension from £10000 as stated in the tax letter.

I can't seem to get my head round it  ?
That the amount I have earned in interest is now removed from my tax  code.?
I understand I have to pay tax on my interest at 20% but does lowering the tax code result in you paying more tax effectively than if you just paid the 20% tax as a lump sum??

Also next tax year I will not be earning this amount of interest as I will be putting £20k in an Isa.
So do I leave this code as is and wait until next year for it to be adjusted or let HMRC know now.

eskbanker

SJS5 said:

Hi struggling to get my head round my tax code letter that I received today.
Is this for 2024/25 or 2025/26?

It states I have £2571 in untaxed interest. 
And do you?  Do your own records reconcile with this?  Does it relate to estimated interest for 2024/25 or repaying underpaid 2023/24 tax in 2025/26?

My previous tax code was 1302L which is used mostly against my pension which is £13k a year.

I also work part time .
You should have two separate codes then, one for each income stream.

I've added some comments above that should help posters to answer all your other questions....

SJS5

Hi
In answer to above

This is a tax code letter for 6th April 2024 to 2025

Yes I did earn the interest .

And yes I have 2 tax codes.
The one on pension will be 1002LX
One on wages will be 42T

Dazed_and_C0nfused

SJS5 said:

Hi struggling to get my head round my tax code letter that I received today.
It states I have £2571 in untaxed interest. 
My previous tax code was 1302L which is used mostly against my pension which is £13k a year.

I also work part time .

My tax code has now altered to 1002L X

 Is this new tax code just calculated by taking 2571 from 1302 roughly.
So in effect from April I will start paying more tax on my pension from £10000 as stated in the tax letter.

I can't seem to get my head round it  ?
That the amount I have earned in interest is now removed from my tax  code.?
I understand I have to pay tax on my interest at 20% but does lowering the tax code result in you paying more tax effectively than if you just paid the 20% tax as a lump sum??

Also next tax year I will not be earning this amount of interest as I will be putting £20k in an Isa.
So do I leave this code as is and wait until next year for it to be adjusted or let HMRC know now.

If you have the new tax code that will show the breakdown of how 1002L was arrived at.

It could well be predominantly the untaxed interest amount that has changed the code but there might also be a deduction for estimated tax owed for this tax year.  And also the 420-429 allowances used in the tax code for your part time job.

As the 1002L tax code is for the current tax year it will have an impact the next time your pension is paid.  Assuming you are paid the pension monthly you will start paying tax on anything above £836.

You can expect to get a new tax code for the next tax year sometime between now and March.

Ultimately you won't pay any more tax than you need to, if you pay too much during the year HMRC will refund anything overpaid.  If you don't pay enough they will ask you to pay the extra (often by adjusting your tax code from the next 6 April).

There is nothing to stop you providing HMRC with more accurate estimates if you wish.  But they will probably want details for each individual account, not just a new total amount.

Yellowbelly24

I wasn’t told my tax code was changed, by HMRC a I found out because my pension provider (NHS) sent me notification saying i will now be paying at. On my pension which is less than 11k and my only source of income. 

My code has been lowered by HMRC due to savings interest which is not taxed. My code was 1130N is now 1064 N 
ive spoked to HMRC they say I won’t pay tax, but the NHS pensions that paymaster have sent me notification saying as of next month I will be paying tax 

Dazed_and_C0nfused

Yellowbelly24 said:

I wasn’t told my tax code was changed, by HMRC a I found out because my pension provider (NHS) sent me notification saying i will now be paying at. On my pension which is less than 11k and my only source of income. 

My code has been lowered by HMRC due to savings interest which is not taxed. My code was 1130N is now 1064 N 
ive spoked to HMRC they say I won’t pay tax, but the NHS pensions that paymaster have sent me notification saying as of next month I will be paying tax 

Is your expected pension more than £10,649?

sheramber

Yellowbelly24 said:

I wasn’t told my tax code was changed, by HMRC a I found out because my pension provider (NHS) sent me notification saying i will now be paying at. On my pension which is less than 11k and my only source of income. 

My code has been lowered by HMRC due to savings interest which is not taxed. My code was 1130N is now 1064 N 
ive spoked to HMRC they say I won’t pay tax, but the NHS pensions that paymaster have sent me notification saying as of next month I will be paying tax 

Untaxed interest is also income.