Confused about self assessment

lilacskitten

I have a full time job,rental income and pay in to a SIPP to avoid 40pc tax.
Last year I was given a tax code of 2020l which my employer has used so I don't pay tax of the first 20k of income.
However when I do my SA the calculation is different and they take all my income, deduct the normal tax free amount of 12250 and then use the 20k as a basic rate extension. 
So I don't pay 40pc tax but I do owe more 20pc tax than would be due on the rental income alone.... Is that right?
Very confused...thanks for any guidance 

Nomunnofun1

You can only ever have a personal allowance of 12570 (not 12250).

However, HMRC would have adjusted your tax code to enable you to obtain the higher rate relief on you pension contribution through PAYE. 

If your tax liability is more than 20% of your rental profit it is most likely that the tax code was wrong or something else occurred at PAYE source. 

What was your pension contribution (actually paid by you)?
what was your taxable salary? 

Is there a mortgage on the let property and has the 20% relief been deducted from the liability on the calculation?

lilacskitten

Salary on P60 was £60k and tax was £8394 which seems right.

Rental profit was £7136 and SA is saying tax will be £2432

SIPP payment was £19687 inc tax refund at 20pc

No mortgage 

Nomunnofun1

lilacskitten said:

Salary on P60 was £60k and tax was £8394 which seems right.

Rental profit was £7136 and SA is saying tax will be £2432

SIPP payment was £19687 inc tax refund at 20pc

No mortgage 

Your total taxable income was £67136 which is £16866 above the amount where 40% kicks in. You therefore only needed to pay that amount (gross to avoid 40%). 

The additional tax relief should have been £3373.20 (£16866 at 20%). 

HMRC increased your code to 2020L giving you and additional £7639 of personal allowance in your code. (20209 - 12579). £7639 at 40% is £3055.60 - you should be owed £217.60. 

The tax on £60000 on a code of 2020L is £8376.40 - not far off and so there must be some further issue. I notice, however, that tax at 40% on the rental would be £2854.40 - take off the £217.60 and we are not far away?

So, the question is, where did you put the pension contribution on the form and what did you enter? 

(Does the calculation show any income charged at 40%?)

Did you physically pay £15750 to your pension?

lilacskitten

All the tax calculation is showing at 20pc.

The pension amount of £19k was included in this section 
Payments to registered pension schemes (also known as PPR) where basic rate tax relief will be claimed by your pension provider (called 'relief at source'). Enter the payments and basic rate tax:

lilacskitten

And yes I've physically paid the money £15k in to the pension over the course of the year.

Nomunnofun1

lilacskitten said:

All the tax calculation is showing at 20pc.

The pension amount of £19k was included in this section 
Payments to registered pension schemes (also known as PPR) where basic rate tax relief will be claimed by your pension provider (called 'relief at source'). Enter the payments and basic rate tax:

Total income 67136. 

Personal allowance 12570. 

£54566 at 20%

???

lilacskitten

Yes that's what the SA is showing 

Nomunnofun1

lilacskitten said:

Yes that's what the SA is showing 

Any chance you could give us a breakdown of your code number for 2024/25?

lilacskitten

Do you mean this breakdown?

What your tax code means

Based on the information provided, you told us:

your tax code is C2020L

your annual income is £60,047.00

How much Income Tax you will pay

A C2020L tax code means you can earn £20,200 each year tax free.

The Income Tax you are due to pay is:

£161.45 every week

£645.78 every 4 weeks

£699.60 every month

£8,395.20 every year

What the letters in your tax code mean

The L at the end of your tax codes means you’re entitled to a tax-free Personal Allowance.

Only one source of income can have a tax code ending with an L.

You can start again to check another tax code.

Nomunnofun1

No - how do they arrive at 2020L?

The only explanation that I have is that too much pension relief was granted with an insufficient deduction for rental income - but I’m guessing now!