Moving from Alpha to Partnership - tax code change question.

SimonSeys

Hi all,

Sorry for being a bit thick, but I think I’ve got there eventually.   Thanks Molerat.  The 9k payment is exactly half the difference between the £50,270 upper band and the £68k figure. (I’ve rounded numbers in this thread, for simplicity and privacy - but when I use precise numbers it reconciles to within £1)

I still don’t know why HMRC was showing my estimated earnings as £68k.  I’ve logged on and changed back to my actual salary (less two months of DB contributions).  It says it takes 48 hours to process but hopefully it will change then. 

One (hopefully final) question from me, but how are historic months corrected?   My tax code has been too low for a few months now.  Will this work itself out or do I have to claim it back somehow, possibly through self assessment.

Si

hugheskevi

Sorry for being a bit thick, but I think I’ve got there eventually.   Thanks Molerat.  The 9k payment is exactly half the difference between the £50,270 upper band and the £68k figure. (I’ve rounded numbers in this thread, for simplicity and privacy - but when I use precise numbers it reconciles to within £1)

I still don’t know why HMRC was showing my estimated earnings as £68k.  I’ve logged on and changed back to my actual salary (less two months of DB contributions).  It says it takes 48 hours to process but hopefully it will change then. 

One (hopefully final) question from me, but how are historic months corrected?   My tax code has been too low for a few months now.  Will this work itself out or do I have to claim it back somehow, possibly through self assessment.

If HMRC think your taxable income is £68K and you are putting money into a pension via relief at source, you will be due higher rate relief up to £68,000 - £50,270 = £17,730. Any contribution beyond that would just get basic rate relief automatically via the provider, which is all that is due.

A £17,730 gross contribution would get £3,546 automatic basic rate relief, and a further £3,546 of higher rate relief credited via the Tax Coding notice. Starting with a standard Tax Code, this would lead to an adjusted Tax Code of £21,435, which is extremely close to the 2150L figure you cited earlier.

Every month you get 1/12th of your allowances and thresholds. This accumulates as the tax year progresses. When your Tax Code changes, everything is recalculated based on the new code the next month based on cumulative taxable income to date, and the newly calculated cumulative allowances that apply. So everything that happened before doesn't matter except insofar as it leads to the cumulative year-to-date numbers. As long as Tax Code is correct in the final month of the tax year, everything will be correct (with a few caveats, eg things like limits of 50% of pay period income that will be taken in income tax within a single period).

SimonSeys

Just a quick follow up to this.  I changed my expected taxable earnings on the Government Gateway and my tax code changed at 2am the following day!  Very impressed.  

I’m still not sure why my taxable earnings were changed to £68k, and I was nervous about reversing this change given that it took a couple of months for my paperwork to upload successfully but thanks again to everyone for your advice and patience. 

Si

Dazed_and_C0nfused

SimonSeys said:

Just a quick follow up to this.  I changed my expected taxable earnings on the Government Gateway and my tax code changed at 2am the following day!  Very impressed.  

I’m still not sure why my taxable earnings were changed to £68k, and I was nervous about reversing this change given that it took a couple of months for my paperwork to upload successfully but thanks again to everyone for your advice and patience. 

Si

Good to have an update.  So it sounds like HMRC had got details of the gross contribution correct all along (as per the info you have provided them with), it was simply an incorrect estimated earnings value which was wrong?

SimonSeys

Dazed_and_C0nfused said:

SimonSeys said:

Just a quick follow up to this.  I changed my expected taxable earnings on the Government Gateway and my tax code changed at 2am the following day!  Very impressed.  

I’m still not sure why my taxable earnings were changed to £68k, and I was nervous about reversing this change given that it took a couple of months for my paperwork to upload successfully but thanks again to everyone for your advice and patience. 

Si

Good to have an update.  So it sounds like HMRC had got details of the gross contribution correct all along (as per the info you have provided them with), it was simply an incorrect estimated earnings value which was wrong?

Yes that’s right.  Timeline was:
- August - submitted details of new pension arrangements including payslips etc. 

- September (four weeks later) received letter saying they needed proof of new pension scheme
- phoned up.  Apparently attachments not uploaded properly. 

- re submitted. 

- received notice of tax code change (but only £9k) taxable earnings reduced to £68k
- phoned up.  Told I’d have to provide proof of pension contributions each month. 

- posted here
- changed taxable salary to what it should be an tax code changed automatically.