Six Tax code notices since Jan 24 for 24/25 tax year

Freeheeler

My 93 year old dad has SIX (yes I know I'm shouting) tax code letters between Jan & Dec 24 for 24/25 tax year, each increasing the amount he has to pay. Is this normal?
We have no idea why. There is some untaxed interest which is fine, but the "adjustment for estimated tax you owe this year" is not explained. He does not have an online account - do you recommend I create one for him?  He used to be an accountant and is very frustrated by this. 

SacredStephan

Freeheeler said:

He does not have an online account - do you recommend I create one for him?

Yes, but he will need to supply a valid passport or photocard driving licence in order to set it up.

Freeheeler

Thank you.
Ok - that could be tomorrow's task. At least he has a computer and email and very sensibly took out a new passport when he gave up his driving licence last year.
It doesn't seem a good use of HMRC's very limited capacity to keep changing their assessment given that nothing in his circumstances has changed.

eskbanker

They will generally use the actual interest received during 2023/24 as an estimate for 2024/25, and adjust codes on that basis - the reconciliation of interest returns from banks and building societies is usually in the autumn but has been running later this year, so it should be expected that many are having tax codes amended around now, so as to collect the estimated tax liability over the remaining month or two of the tax year, which in turn leads to some apparently extreme adjustments because of the short timescale.  He ought to have a copy of their figure for 2023/24 interest shortly if not already, but will presumably have his own records anyway?

No idea why there'd be so many coding adjustments needed though - he can presumably identify the variances between each?

Freeheeler

Thanks Eskbanker, this makes some sense.  
I was puzzling why the adjustment in the Nov letter was £1961 for £154.80 tax owed but by Dec it's £2323 for £122.20 and then thought it must be timescale.

I think basically he is one of the many caught out (and creating a lot of work for HMRC) by increasing interest rates, but also this is his first full year as a widower so the "household" tax allowance on interest has gone from £2000 to £1000. He had not bothered with ISAs - he is doing now!

(Incidentally this is my first time for ages on MSE forums - what a fantastic resource they are).

Dazed_and_C0nfused

Freeheeler said:

Thanks Eskbanker, this makes some sense.  
I was puzzling why the adjustment in the Nov letter was £1961 for £154.80 tax owed but by Dec it's £2323 for £122.20 and then thought it must be timescale.

I think basically he is one of the many caught out (and creating a lot of work for HMRC) by increasing interest rates, but also this is his first full year as a widower so the "household" tax allowance on interest has gone from £2000 to £1000. He had not bothered with ISAs - he is doing now!

(Incidentally this is my first time for ages on MSE forums - what a fantastic resource they are).

It is tricky to understand the exact figures where the (estimated) underpayment is being collected for the current tax year in the tax code for the current tax year.

If it was an underpayment from a prior year of say £154.80 then the adjustment needed for a basic rate payer would be £774 as that £774 would be in place for the full 12 months of the tax year (774 x 20% = 154.80).

But when the estimated underpayment arises part way through the tax year then adjustment needed is much larger.  For example the £1,961 would collect £392.20 if it has been on place for a whole tax year.  But if it was only in place for ~20-21 weeks of the tax year then it could be expected to collect £154.80.

Likewise by December there might be just 14 weeks left of the tax year so an even bigger adjustment (£2323) is needed to collect what is actually a smaller amount (£122.20).

lr1277

I think my mum has had 3 tax code notices in 24/25 for interest earned in 23/24. Then last week she got another notice for the tax year 25/26.

Similar position to your dad in that my dad died in 2022. So my mum now gets his private and state pension and there is only 1 person's allowance to absorb the income.

I am not too worried because I know it will be sorted out in the SA tax return. But the changes in tax code mean a reduced pension for every notice which worries my mum.

Like your dad, we are moving savings into ISA's now.

Freeheeler

Thanks Dazed&Confused - that's what I was working out eventually

And also thanks lr1277 - good to know others are having to deal with this. For me,  it is usually over the phone which add to stress all round.

poppystar

I had five changes of code in three months last year. Drove me mad trying to figure out what was happening. And since I get paid monthly only three of those could ever be actioned! In the end I gave up trying to follow it and just left it to the end of the year to check the tax paid made sense once the full year picture was there. 

molerat

I'm on the 4th.  First before start of year which I knew used loads of incorrect assumptions causing banding problems.  Next mid April once assumptions had been corrected with confirmed hard estimates.  Third in Jan when some random out of the blue assumptions were dreamt up and 4th putting code back to where it was once random assumptions were corrected back to April confirmed hard, now even harder, estimates.