Help!! HMRC randomly dipped in and took 1/4 of my wages

Dazed_and_C0nfused

masonic said:

Dazed_and_C0nfused said:

masonic said:

QrizB said:

OP has a salary of £45k and is earning about £6k pa in interest from unsheltered instant access savings accounts. This seems likely to put them very close to the higher rate tax threshold?

OP are you making pension contributions etc. that will keep you in the basic rate band?

Perhaps this goes some way to explaining the £10,658 figure, if HMRC has assumed some or all of the interest falls into the higher rate band this year.

The £10,658 is based on a combination of the underlying amount owed that is trying to be collected, the tax rate that the PAYE income will be taxed at and the period left in the tax year that the tax owed will be collected over.

So the nearer the end of the year the larger the deduction needs to be to collect relatively small sums.

£10,658 when an employer is only deducting basic rate tax would collect £2,131.60 over a full tax year.

But if the code with £10,658 deduction in was only being used for 3 months then it would only be intended to collect an extra £532.90 in that 3 month period.

Hmm, unless I'm reading the notice of coding incorrectly, the £10,658 is being added to the £553 prior untaxed interest and the £4,207 from 2023/24 to give a total of £15,248 leaving a negative personal allowance for this year. Which is consistent with the K coding. If the £10,658 has the effect of taking £178 in additional tax per month, the £4,760 of known untaxed interest requires £952 in basic rate tax to be paid this tax year in addition to the £532.90 being collected speculatively, for a total of £1,485. But OP claims his latest payslip was £600 lighter in the first month, and we believe that will be the same for the following 2 months if earnings are level. So something is not adding up.

Without all the info from recent payslips impossible to know exactly what has happened.

Previous experience has shown the £600 might be factually correct i.e. tax last month say £500 and this month £1,100.

But, for example, a backdated pay rise which was included in this month's pay for the first time has not been mentioned.  And that would mean extra tax would have been deducted anyway, the extra tax being the result of more than one change.

eskbanker

Dazed_and_C0nfused said:

eskbanker said:

Dazed_and_C0nfused said:

Ayr_Rage said:

brutal_deluxe said:

Thanks guys, appreciate this.

So listen, all I'm concerned about right now is what's happening from this point on.

The first thing that's stated in black and white is it's 'estimated' have "underpaid 549 tax this year". Fine, so once that 'debt' is clear, it's over right? Back to my original tax code? How can it be read any other way? 

Going forward you need to check your online account for the amount of non coded income as HMRC will adjust your next tax code to recover the tax on that.

You can update that figure yourself online once you've worked out your estimate.

Tax is never charged on that entry.

Do you mean that tax isn't deducted via PAYE for such income?

It isn't deducted via PAYE and it isn't included in a PAYE tax calculation.  And there is no box on a Self Assessment return to declare "non coded income" as a thing in its own right (you might declare specific income types that were not in your tax code, rental income for example).

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye130035

Note: The non coded income amount entered will be included with the PAYE income and Benefits in Kind (BIK) amount for the Total Income figure on which coding calculations are based. It will not be used in the End of Year reconciliation.

We're maybe at cross purposes here - do you agree that the income represented by that entry is ultimately taxable income, rather than being tax-free (which could be inferred from "Tax is never charged on that entry")?

Dazed_and_C0nfused

eskbanker said:

Dazed_and_C0nfused said:

eskbanker said:

Dazed_and_C0nfused said:

Ayr_Rage said:

brutal_deluxe said:

Thanks guys, appreciate this.

So listen, all I'm concerned about right now is what's happening from this point on.

The first thing that's stated in black and white is it's 'estimated' have "underpaid 549 tax this year". Fine, so once that 'debt' is clear, it's over right? Back to my original tax code? How can it be read any other way? 

Going forward you need to check your online account for the amount of non coded income as HMRC will adjust your next tax code to recover the tax on that.

You can update that figure yourself online once you've worked out your estimate.

Tax is never charged on that entry.

Do you mean that tax isn't deducted via PAYE for such income?

It isn't deducted via PAYE and it isn't included in a PAYE tax calculation.  And there is no box on a Self Assessment return to declare "non coded income" as a thing in its own right (you might declare specific income types that were not in your tax code, rental income for example).

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye130035

Note: The non coded income amount entered will be included with the PAYE income and Benefits in Kind (BIK) amount for the Total Income figure on which coding calculations are based. It will not be used in the End of Year reconciliation.

We're maybe at cross purposes here - do you agree that the income represented by that entry is ultimately taxable income, rather than being tax-free (which could be inferred from "Tax is never charged on that entry")?

Not necessarily no.

I can see non coded income on my Personal Tax Account.  It is a figure I know originated from an old Self Assessment return.

I no longer have that particular income source but as I'm (sadly) not in tapered Personal Allowance range.  Or liable to HICBC or entitled to Married Couple's Allowance it is having absolutely no impact whatsoever on my tax code.

If however it originated from say some rental profit and that income source was continuing it still wouldn't ever be taxed.  But the rental profits I declared on a tax return each year would be taxed.

eskbanker

Ah right, I get the point you're making now!  It represents non-PAYE income that HMRC believes you're receiving, but it may be wrong, and even if it's right, the taxation itself is driven by what's submitted (either via SA or BBSI, etc) rather than the non-coded income figure within the portal.

Dazed_and_C0nfused

eskbanker said:

Ah right, I get the point you're making now!  It represents non-PAYE income that HMRC believes you're receiving, but it may be wrong, and even if it's right, the taxation itself is driven by what's submitted (either via SA or BBSI, etc) rather than the non-coded income figure within the portal.

Basically yes.  From what I can see it's purpose seems to be to ensure the total income is taken into account, presumably for things impacted by adjusted net income.

So you might not pay tax via your tax code on say your rental income but it is factored in for things like tapered Personal Allowance and Married Couple's Allowance.

Whether it should is another question I guess, if you don't want to pay during the year should your Personal Allowance be tapered?  But as PAYE is always provisional it doesn't really matter.

Northern_Wanderer

OP, if not already used your ISA allowance for the current tax year (because you mention March 2024 which was previous tax year), open a real ISA and stuff in £20K, then do the same from 6th April this year.

Does one not need to submit a Self Assessment Tax return when interest (outside the ISA wrapper) is above £1000?

I agree with a previous poster re interest rates picking up a couple of years ago, that's when many had to start getting back into ISA's to avoid tax if interest income was creeping up.

Dazed_and_C0nfused

Northern_Wanderer said:

OP, if not already used your ISA allowance for the current tax year (because you mention March 2024 which was previous tax year), open a real ISA and stuff in £20K, then do the same from 6th April this year.

Does one not need to submit a Self Assessment Tax return when interest (outside the ISA wrapper) is above £1000?

I agree with a previous poster re interest rates picking up a couple of years ago, that's when many had to start getting back into ISA's to avoid tax if interest income was creeping up.

No, you are a factor of 10 out.

It is £10,000 where HMRC think you should file a return simply because of untaxed interest.

EnPointe

brutal_deluxe said:

There is one thing, I had to transfer a large sum briefly into my current account in order to change to another ISA. Would I be liable for tax on that??

 it came out of the ISA wrapper   when you moved it to your current account 

i suspect you have fallen fould of  this due to the method of transfer and  likely  exceeding  your annual allowances by  going out and then back in 

eskbanker

EnPointe said:

brutal_deluxe said:

There is one thing, I had to transfer a large sum briefly into my current account in order to change to another ISA. Would I be liable for tax on that??

 it came out of the ISA wrapper   when you moved it to your current account 

i suspect you have fallen fould of  this due to the method of transfer and  likely  exceeding  your annual allowances by  going out and then back in 

Keep up!  While that point was made last night, subsequent posts clarified that the issue is that the OP misunderstood what an ISA actually is, and at least some of the accounts referred to as such are/were 'Instant Savings Accounts' rather than the genuine tax-free accounts usually denoted by the term....

masonic

eskbanker said:

Ah right, I get the point you're making now!  It represents non-PAYE income that HMRC believes you're receiving, but it may be wrong, and even if it's right, the taxation itself is driven by what's submitted (either via SA or BBSI, etc) rather than the non-coded income figure within the portal.

FWIW, I've had the same or very similar Non-coded income shown in my Personal Tax Account for over 5 years. At one point I did think about using the link below it to let HMRC know it could be removed, but as it has never had any consequence I just left it there.