Tax code change brought drastic net income decrease

Zuzi

Hi all,

I just had a nasty surprise receiving my payslip for April, and I hope someone can help me be clearer on my situation.

My tax code for this FY is 311L, my total tax free amount is just 3119pounds.
This is because my personal allowance 12570 is reduced by both untaxed interest and adjustment for tax I owe, apparently.

As a result of this, my net income has gone down by about 650 pounds this month.

Do I understand it correctly that this will be the case every month this financial year? It's not just a one off, right? And the only way this could be corrected to my advantage is if for some reason my interest this coming year (the amount under "untaxed interest") is lower than what they are anticipating?

Thank you in advance.

Green_hopeful

I don’t think that is right. If your personal allowance has gone from 12570 to 3119 you should be paying 20 percent tax on £9451. That would be £1890 extra to pay. I might have misunderstood? 

Zuzi

I may not have provided all needed information - I am a higher tax rate payer. They will be reclaiming approx 4700 pounds for tax owed on interest (sounds about right tbh) but also about the same amount for "untaxed interest", which leaves just the 3119 left over from the personal allowance.

It seems I need to come to terms with the reduced net amount being my monthly income for now I will need to adjust my budgeting.

sheramber

Zuzi said:

Hi all,

I just had a nasty surprise receiving my payslip for April, and I hope someone can help me be clearer on my situation.

My tax code for this FY is 311L, my total tax free amount is just 3119pounds.
This is because my personal allowance 12570 is reduced by both untaxed interest and adjustment for tax I owe, apparently.

As a result of this, my net income has gone down by about 650 pounds this month.

Do I understand it correctly that this will be the case every month this financial year? It's not just a one off, right? And the only way this could be corrected to my advantage is if for some reason my interest this coming year (the amount under "untaxed interest") is lower than what they are anticipating?

Thank you in advance.

Or you could  pay the underpayment direct and it would be  removed from your code number. 

fisher66

They are changing your tax code to charge you for the £4,700 you owe already for last tax year and they are presuming you will also owe the same(ish) again for this current tax year so you're getting a double whammy!

From next tax year (2025/2026) the amount you owe should have been paid so your tax code should improve for just what they think you'll owe in that tax year. 

sheramber

fisher66 said:

They are changing your tax code to charge you for the £4,700 you owe already for last tax year and they are presuming you will also owe the same(ish) again for this current tax year so you're getting a double whammy!

From next tax year (2025/2026) the amount you owe should have been paid so your tax code should improve for just what they think you'll owe in that tax year. 

Do you mean 26/27?

The OP is asking about 25/26, the current year.

Zuzi

Thanks everyone for the responses so far. I am indeed asking whether this April reduction in net pay will continue for the rest of this FY, it feels like a lot of additional tax due. (I agree @fisher66 's reply is probably just a typo in the tax year and understand their response otherwise)

DRS1

Presumably you cannot contribute enough to a pension to get yourself down into basic rate territory?  That might save a bit of tax on the interest.

Will your interest for 24/5 (or maybe it is 25/6) be more than your interest for 23/4 (I am assuming their estimate in the 25/6 tax code is based on 23/4 interest.).  You can go online and correct their figure if you have an accurate one yourself.

Dazed_and_C0nfused

Zuzi said:

Thanks everyone for the responses so far. I am indeed asking whether this April reduction in net pay will continue for the rest of this FY, it feels like a lot of additional tax due. (I agree @fisher66 's reply is probably just a typo in the tax year and understand their response otherwise)

It will continue for the moment but might be updated once HMRC have details of your interest for 2024-25.

If course if that is going to similar or more than it was in 2023-24 (the year they normally use an estimate at the moment) it won't really help, you could even be paying more tax than you have done in April.