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

brutal_deluxe

Bobziz said:

There's potentially another elephant in the room, which is why you have so much cash in savings accounts? What do you plan to use the money for ? 

It's my life savings to be used as a deposit for a house

brutal_deluxe

Expotter said:

Dazed_and_C0nfused said:

brutal_deluxe said:

Bobziz said:

Worth checking your other 'ISA' accounts too just in case they are not actually what you think they are.

I'm assuming this includes my other savings accounts. Ok fine. I think all I needed to know was how much I can expect to have taken from my monthly pay for the immediate future. If I have underpaid (as they say) 549, and I have paid most of that this month, then the remainder is small and they won't take any more than they should? 

I just don't want to have to chase a rebate or anything . It's definitely not going to be more than the 549 they day I've underpaid?

Once this has been established, I can consider moving from these non ISA accounts that I appear to have misunderstood 

In your original post you said the new tax code was K283X.  The X isn't really part of the code, it signifies that the code should be used on a non cumulative basis, i.e. just on each pay day from now on without taking into account what you earned earlier in this tax year.

So if you earn exactly the same next month as you did when K283X was first used you can expect to pay the exact same amount of tax.  That will only change on 6 April, when a new tax code should be in place (details of what that new tax code is might not be available just yet).

This is correct, I also had my code changed to X (month 1) out of the blue and had extra tax deducted. I phoned HMRC ( over an hour on hold) and was told that because there is income from savings the system changes the code automatically to X. After explaining my income hadn't changed from the estimate, it was changed there and then back to a cumulative code. I'm hoping the extra tax will be refunded on my next pay.

Can you clarify this a bit. So did they take the same amount off you the next month meaning you were overpaying tax? If you hadn't of called then they just would have kept taking it? What is the estimate you're referring to? It sounds a bit disconcerting, it would be nice to be able to trust them

Expotter

brutal_deluxe said:

Expotter said:

Dazed_and_C0nfused said:

brutal_deluxe said:

Bobziz said:

Worth checking your other 'ISA' accounts too just in case they are not actually what you think they are.

I'm assuming this includes my other savings accounts. Ok fine. I think all I needed to know was how much I can expect to have taken from my monthly pay for the immediate future. If I have underpaid (as they say) 549, and I have paid most of that this month, then the remainder is small and they won't take any more than they should? 

I just don't want to have to chase a rebate or anything . It's definitely not going to be more than the 549 they day I've underpaid?

Once this has been established, I can consider moving from these non ISA accounts that I appear to have misunderstood 

In your original post you said the new tax code was K283X.  The X isn't really part of the code, it signifies that the code should be used on a non cumulative basis, i.e. just on each pay day from now on without taking into account what you earned earlier in this tax year.

So if you earn exactly the same next month as you did when K283X was first used you can expect to pay the exact same amount of tax.  That will only change on 6 April, when a new tax code should be in place (details of what that new tax code is might not be available just yet).

This is correct, I also had my code changed to X (month 1) out of the blue and had extra tax deducted. I phoned HMRC ( over an hour on hold) and was told that because there is income from savings the system changes the code automatically to X. After explaining my income hadn't changed from the estimate, it was changed there and then back to a cumulative code. I'm hoping the extra tax will be refunded on my next pay.

Can you clarify this a bit. So did they take the same amount off you the next month meaning you were overpaying tax? If you hadn't of called then they just would have kept taking it? What is the estimate you're referring to? It sounds a bit disconcerting, it would be nice to be able to trust them

Yes, they took the tax on a month 1 basis, so I ended up paying extra tax that won't be due in the end when the whole year is calculated. It happened this month, so with the X code, I'd be overcharged every month until at least the end of the financial year. Hopefully now that is reverted to cumulative, the extra tax should be refunded and the correct amount of tax deducted.
The estimate I referred to is the total income estimate for the financial year.

Grumpy_chap

Just one thought.
The OP has been accruing funds over a number of years in isa's (instant-access savings accounts) (not tax exempt) but thought they were ISA's (Individual Savings Accounts) (tax exempt).
Is there a possibility that there is income tax due from previous years which has not been declared?

masonic

Grumpy_chap said:

Just one thought.
The OP has been accruing funds over a number of years in isa's (instant-access savings accounts) (not tax exempt) but thought they were ISA's (Individual Savings Accounts) (tax exempt).
Is there a possibility that there is income tax due from previous years which has not been declared?

This is exactly the situation, and from the information provided the tax being taken looks about right. So it is a different situation from that of Expotter.

There isn't any obligation to declare savings interest if you are on PAYE unless the interest exceeds £10k. But it can save some pain down the road.

Dazed_and_C0nfused

brutal_deluxe said:

Expotter said:

Dazed_and_C0nfused said:

brutal_deluxe said:

Bobziz said:

Worth checking your other 'ISA' accounts too just in case they are not actually what you think they are.

I'm assuming this includes my other savings accounts. Ok fine. I think all I needed to know was how much I can expect to have taken from my monthly pay for the immediate future. If I have underpaid (as they say) 549, and I have paid most of that this month, then the remainder is small and they won't take any more than they should? 

I just don't want to have to chase a rebate or anything . It's definitely not going to be more than the 549 they day I've underpaid?

Once this has been established, I can consider moving from these non ISA accounts that I appear to have misunderstood 

In your original post you said the new tax code was K283X.  The X isn't really part of the code, it signifies that the code should be used on a non cumulative basis, i.e. just on each pay day from now on without taking into account what you earned earlier in this tax year.

So if you earn exactly the same next month as you did when K283X was first used you can expect to pay the exact same amount of tax.  That will only change on 6 April, when a new tax code should be in place (details of what that new tax code is might not be available just yet).

This is correct, I also had my code changed to X (month 1) out of the blue and had extra tax deducted. I phoned HMRC ( over an hour on hold) and was told that because there is income from savings the system changes the code automatically to X. After explaining my income hadn't changed from the estimate, it was changed there and then back to a cumulative code. I'm hoping the extra tax will be refunded on my next pay.

Can you clarify this a bit. So did they take the same amount off you the next month meaning you were overpaying tax? If you hadn't of called then they just would have kept taking it? What is the estimate you're referring to? It sounds a bit disconcerting, it would be nice to be able to trust them

The X is not part of a tax code, it signifies the code should be used on a non-cumulative basis.  

Contrary to what was previously posted a non-cumulative code is unrelated to savings interest.

A non-cumulative code can be issued for a variety of reasons but two common ones are where there is information missing so a cumulative code cannot be issued and, the one that probably applies here, where it is to essentially to protect you from having a lot of tax deducted in respect of the earlier part of the tax year.

So if you are going to ask HMRC to issue a cumulative code (which I think you are perfectly entitled to do) you need to understand what the consequences might be.

To check that you will the taxable earnings so far for the current tax year and the total tax deducted from your earnings so far in this tax year.  If you have just one one employment and no pensions (in payment) then it should be very simple to do.  You will need to estimate your expected taxable earnings on your next pay day and a note of the tax already deducted and then you can use this calculator. 

https://www.gov.uk/guidance/work-out-an-employees-income-tax

You would have to start by assuming the code will be K283 (cumulative) but the actual code would likely be different if you insist on a cumulative one being issued.

Northern_Wanderer

Dazed_and_C0nfused said:

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.

Thanks, somehow I thought it was £1000. Found this which contributes to the thread.... https://www.gov.uk/apply-tax-free-interest-on-savings 

If no longer self-employed, and now employed, assume HMRC will adjust one's tax code if interest falls into a taxable bracket?

Dazed_and_C0nfused

Northern_Wanderer said:

Dazed_and_C0nfused said:

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.

Thanks, somehow I thought it was £1000. Found this which contributes to the thread.... https://www.gov.uk/apply-tax-free-interest-on-savings 

If no longer self-employed, and now employed, assume HMRC will adjust one's tax code if interest falls into a taxable bracket?

Yes.  It generally works on a three year cycle.

Year 1.  HMRC use an estimate of untaxed interest from the prior year when calculating your tax code.  This might mean your tax code has no deduction in it.

Year 2.  The actual information for year 1 is received from all the banks and building societies. HMRC review your overall tax position and contact you if you have underpaid or overpaid tax.  If you have underpaid they normally try and collect the tax by adjusting your tax from the start of the next tax year (year 3). If you have overpaid you get a refund direct from HMRC. They may also update your year 2 tax code, using the year 1 interest details as the latest estimate.

Year 3.  Any extra tax owed from year 1 is included in your tax code for year 3.

brutal_deluxe

Just wanted to say thanks everyone who's contributed, I've learned a lot and feel I understand a bit better what's happening now

Flugelhorn

brutal_deluxe said:

Bobziz said:

There's potentially another elephant in the room, which is why you have so much cash in savings accounts? What do you plan to use the money for ? 

It's my life savings to be used as a deposit for a house

maybe @Bobziz thinks you should be investing rather than saving in cash. It is up to you how you save it - mine is all cash, have been bitten by investing twice now, enough is enough