How to calculate a tax code

skguselli74

If you are a higher rate earner.  For example, earn £60,000
If you pay £8000 into a sipp.
What would the tax code be, given no other benefits or deductions.

£2000 would be added as relief at source, giving a total to declare to HMRC of £10000.

Would the tax code change by 10000, or 5000 points ?

Thank you

Dazed_and_C0nfused

skguselli74 said:

If you are a higher rate earner.  For example, earn £60,000
If you pay £8000 into a sipp.
What would the tax code be, given no other benefits or deductions.

£2000 would be added as relief at source, giving a total to declare to HMRC of £10000.

Would the tax code change by 10000, or 5000 points ?

Thank you

Neither as you are only entitled to higher rate relief on part of that contribution.

Assuming the only taxable income is the £60,000 earnings then the tax code would be increased from 1257L to 1743L (tax code allowances changing from 12,570 to 17,435)

[Deleted User]

skguselli74 said:

If you are a higher rate earner.  For example, earn £60,000
If you pay £8000 into a sipp.
What would the tax code be, given no other benefits or deductions.

£2000 would be added as relief at source, giving a total to declare to HMRC of £10000.

Would the tax code change by 10000, or 5000 points ?

Thank you

Higher rate relief due on (£60000 -50270)  £9730 at 20% which is £1946. 

£4865 at 20% is £1946.

4865 added to personal allowance of 12570 - 17435. 

Code 1743L. 

Albermarle

Although in reality if you report the £10K contribution after that tax year had completed.
Then normally you would get a rebate of £1946, and then they would change your tax code for the current year, on the assumption you will make the same pension contribution. 

skguselli74

Thank you very much, that confirms my fears that last years of 2153L was wrong.  I had rung HMRC multiple times, but they insisted it was indeed correct.  This years amendment is closer to 1743L, so it looks like I will have a tax bill.

Dazed_and_C0nfused

skguselli74 said:

Thank you very much, that confirms my fears that last years of 2153L was wrong.  I had rung HMRC multiple times, but they insisted it was indeed correct.  This years amendment is closer to 1743L, so it looks like I will have a tax bill.

A tax code is only ever provisional, it is important to keep an eye on how much HMRC estimate your (taxable) earnings will be and if necessary update those via your Personal Tax Account.

No one knows how much you expect to earn as well as you do, HMRC can only ever make an educated guess based on your past history with your employer.

skguselli74

Dazed_and_C0nfused said:

skguselli74 said:

Thank you very much, that confirms my fears that last years of 2153L was wrong.  I had rung HMRC multiple times, but they insisted it was indeed correct.  This years amendment is closer to 1743L, so it looks like I will have a tax bill.

A tax code is only ever provisional, it is important to keep an eye on how much HMRC estimate your (taxable) earnings will be and if necessary update those via your Personal Tax Account.

No one knows how much you expect to earn as well as you do, HMRC can only ever make an educated guess based on your past history with your employer.

they had all my figures, my pension contributions and salary were exactly as I had said they would be for the year but the tax code was calculated wrongly. Its hard to keep an eye on it when you dont know the calculations to use, i hoped by phoning and writing that it would be done correctly, but unfortunately not. Now to await the bill

Albermarle

skguselli74 said:

Dazed_and_C0nfused said:

skguselli74 said:

Thank you very much, that confirms my fears that last years of 2153L was wrong.  I had rung HMRC multiple times, but they insisted it was indeed correct.  This years amendment is closer to 1743L, so it looks like I will have a tax bill.

A tax code is only ever provisional, it is important to keep an eye on how much HMRC estimate your (taxable) earnings will be and if necessary update those via your Personal Tax Account.

No one knows how much you expect to earn as well as you do, HMRC can only ever make an educated guess based on your past history with your employer.

they had all my figures, my pension contributions and salary were exactly as I had said they would be for the year but the tax code was calculated wrongly. Its hard to keep an eye on it when you dont know the calculations to use, i hoped by phoning and writing that it would be done correctly, but unfortunately not. Now to await the bill

They may not send you a bill, but reduce your tax code for this year to recoup the money.