Low income and tax code change

QueenieK

Hi, I'm on a low income of around 11K but with the opportunity of earning a small amount extra in overtime so currently don't pay tax. I have some savings and I earn a little over £1000 a year. I was under the impression that because of my income I qualify for the £1000 psa plus the £5000 starting savings rate so I shouldn't have to pay any tax on the interest I earn on my savings. 

HMRC have just told me they've changed my tax code from 1257L to 1162L and that they have deducted £944 for untaxed interest on savings. I don't understand this at all. I could potentially earn over this amount but am unlikely to reach the usual £1257. Why will I have to pay tax when I should be able to earn over £1000 interest tax free as on low income? It doesn't make sense to me.

Dazed_and_C0nfused

QueenieK said:

Hi, I'm on a low income of around 11K but with the opportunity of earning a small amount extra in overtime so currently don't pay tax. I have some savings and I earn a little over £1000 a year. I was under the impression that because of my income I qualify for the £1000 psa plus the £5000 starting savings rate so I shouldn't have to pay any tax on the interest I earn on my savings. 

HMRC have just told me they've changed my tax code from 1257L to 1162L and that they have deducted £944 for untaxed interest on savings. I don't understand this at all. I could potentially earn over this amount but am unlikely to reach the usual £1257. Why will I have to pay tax when I should be able to earn over £1000 interest tax free as on low income? It doesn't make sense to me.

What does your latest payslip show your taxable earnings are?  How often are you paid?

What do you expect your P60 to show your earnings as for 2025/26?

QueenieK

Dazed_and_C0nfused said:

QueenieK said:

Hi, I'm on a low income of around 11K but with the opportunity of earning a small amount extra in overtime so currently don't pay tax. I have some savings and I earn a little over £1000 a year. I was under the impression that because of my income I qualify for the £1000 psa plus the £5000 starting savings rate so I shouldn't have to pay any tax on the interest I earn on my savings. 

HMRC have just told me they've changed my tax code from 1257L to 1162L and that they have deducted £944 for untaxed interest on savings. I don't understand this at all. I could potentially earn over this amount but am unlikely to reach the usual £1257. Why will I have to pay tax when I should be able to earn over £1000 interest tax free as on low income? It doesn't make sense to me.

What does your latest payslip show your taxable earnings are?  How often are you paid?

What do you expect your P60 to show your earnings as for 2025/26?

I get paid every 4 weeks. My taxable so far is just over £7000 but I'm expecting that to go up by about £1000 tomorrow. I think my earnings for the year will be roughly £12000. Thanks

Dazed_and_C0nfused

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Hi, I'm on a low income of around 11K but with the opportunity of earning a small amount extra in overtime so currently don't pay tax. I have some savings and I earn a little over £1000 a year. I was under the impression that because of my income I qualify for the £1000 psa plus the £5000 starting savings rate so I shouldn't have to pay any tax on the interest I earn on my savings. 

HMRC have just told me they've changed my tax code from 1257L to 1162L and that they have deducted £944 for untaxed interest on savings. I don't understand this at all. I could potentially earn over this amount but am unlikely to reach the usual £1257. Why will I have to pay tax when I should be able to earn over £1000 interest tax free as on low income? It doesn't make sense to me.

What does your latest payslip show your taxable earnings are?  How often are you paid?

What do you expect your P60 to show your earnings as for 2025/26?

I get paid every 4 weeks. My taxable so far is just over £7000 but I'm expecting that to go up by about £1000 tomorrow. I think my earnings for the year will be roughly £12000. Thanks

So your tax code has been changed like that as you can only use the two 0% tax bands for interest once you have used your Personal Allowance.

And based on your earnings so far you have spare allowances which the interest can use.

If you expect your earnings to increase your can just log into your Personal tax Account and update your estimated earnings.  If you use £12,570 then you won't have any spare allowances and your tax code will automatically revert back to 1257L within a few days.

And if you pay tax on your next payslip it will be refunded on the payslip after that (assuming your earnings are on track to be no more than £12,570).

QueenieK

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Hi, I'm on a low income of around 11K but with the opportunity of earning a small amount extra in overtime so currently don't pay tax. I have some savings and I earn a little over £1000 a year. I was under the impression that because of my income I qualify for the £1000 psa plus the £5000 starting savings rate so I shouldn't have to pay any tax on the interest I earn on my savings. 

HMRC have just told me they've changed my tax code from 1257L to 1162L and that they have deducted £944 for untaxed interest on savings. I don't understand this at all. I could potentially earn over this amount but am unlikely to reach the usual £1257. Why will I have to pay tax when I should be able to earn over £1000 interest tax free as on low income? It doesn't make sense to me.

What does your latest payslip show your taxable earnings are?  How often are you paid?

What do you expect your P60 to show your earnings as for 2025/26?

I get paid every 4 weeks. My taxable so far is just over £7000 but I'm expecting that to go up by about £1000 tomorrow. I think my earnings for the year will be roughly £12000. Thanks

So your tax code has been changed like that as you can only use the two 0% tax bands for interest once you have used your Personal Allowance.

And based on your earnings so far you have spare allowances which the interest can use.

If you expect your earnings to increase your can just log into your Personal tax Account and update your estimated earnings.  If you use £12,570 then you won't have any spare allowances and your tax code will automatically revert back to 1257L within a few days.

And if you pay tax on your next payslip it will be refunded on the payslip after that (assuming your earnings are on track to be no more than £12,570).

I think i understand although it seems silly to me to tax then pay it back. If I was to update my earnings now, would it change my tax code to avoid being taxed in the first place?

Dazed_and_C0nfused

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Hi, I'm on a low income of around 11K but with the opportunity of earning a small amount extra in overtime so currently don't pay tax. I have some savings and I earn a little over £1000 a year. I was under the impression that because of my income I qualify for the £1000 psa plus the £5000 starting savings rate so I shouldn't have to pay any tax on the interest I earn on my savings. 

HMRC have just told me they've changed my tax code from 1257L to 1162L and that they have deducted £944 for untaxed interest on savings. I don't understand this at all. I could potentially earn over this amount but am unlikely to reach the usual £1257. Why will I have to pay tax when I should be able to earn over £1000 interest tax free as on low income? It doesn't make sense to me.

What does your latest payslip show your taxable earnings are?  How often are you paid?

What do you expect your P60 to show your earnings as for 2025/26?

I get paid every 4 weeks. My taxable so far is just over £7000 but I'm expecting that to go up by about £1000 tomorrow. I think my earnings for the year will be roughly £12000. Thanks

So your tax code has been changed like that as you can only use the two 0% tax bands for interest once you have used your Personal Allowance.

And based on your earnings so far you have spare allowances which the interest can use.

If you expect your earnings to increase your can just log into your Personal tax Account and update your estimated earnings.  If you use £12,570 then you won't have any spare allowances and your tax code will automatically revert back to 1257L within a few days.

And if you pay tax on your next payslip it will be refunded on the payslip after that (assuming your earnings are on track to be no more than £12,570).

I think i understand although it seems silly to me to tax then pay it back. If I was to update my earnings now, would it change my tax code to avoid being taxed in the first place?

When do you think your employer will be running the payroll for the next pay of £1,000?

Do you know what the tax period for that payment will be (your last payslip should have a tax week number)?

HMRC aren't mind readers, the new tax code is based on what they already know i.e. your earnings so far are well under £12,570/year.  They cannot know you might earn more between now and 5 April.  But as you do know it you can let them have an updated figure for your expected earnings.

QueenieK

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Hi, I'm on a low income of around 11K but with the opportunity of earning a small amount extra in overtime so currently don't pay tax. I have some savings and I earn a little over £1000 a year. I was under the impression that because of my income I qualify for the £1000 psa plus the £5000 starting savings rate so I shouldn't have to pay any tax on the interest I earn on my savings. 

HMRC have just told me they've changed my tax code from 1257L to 1162L and that they have deducted £944 for untaxed interest on savings. I don't understand this at all. I could potentially earn over this amount but am unlikely to reach the usual £1257. Why will I have to pay tax when I should be able to earn over £1000 interest tax free as on low income? It doesn't make sense to me.

What does your latest payslip show your taxable earnings are?  How often are you paid?

What do you expect your P60 to show your earnings as for 2025/26?

I get paid every 4 weeks. My taxable so far is just over £7000 but I'm expecting that to go up by about £1000 tomorrow. I think my earnings for the year will be roughly £12000. Thanks

So your tax code has been changed like that as you can only use the two 0% tax bands for interest once you have used your Personal Allowance.

And based on your earnings so far you have spare allowances which the interest can use.

If you expect your earnings to increase your can just log into your Personal tax Account and update your estimated earnings.  If you use £12,570 then you won't have any spare allowances and your tax code will automatically revert back to 1257L within a few days.

And if you pay tax on your next payslip it will be refunded on the payslip after that (assuming your earnings are on track to be no more than £12,570).

I think i understand although it seems silly to me to tax then pay it back. If I was to update my earnings now, would it change my tax code to avoid being taxed in the first place?

When do you think your employer will be running the payroll for the next pay of £1,000?

Do you know what the tax period for that payment will be (your last payslip should have a tax week number)?

HMRC aren't mind readers, the new tax code is based on what they already know i.e. your earnings so far are well under £12,570/year.  They cannot know you might earn more between now and 5 April.  But as you do know it you can let them have an updated figure for your expected earnings.

I will get my next payslip tomorrow week 33. I'm still unsure if they think i will earn less than the 1257 why they want to lower my tax free amount?

Dazed_and_C0nfused

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Hi, I'm on a low income of around 11K but with the opportunity of earning a small amount extra in overtime so currently don't pay tax. I have some savings and I earn a little over £1000 a year. I was under the impression that because of my income I qualify for the £1000 psa plus the £5000 starting savings rate so I shouldn't have to pay any tax on the interest I earn on my savings. 

HMRC have just told me they've changed my tax code from 1257L to 1162L and that they have deducted £944 for untaxed interest on savings. I don't understand this at all. I could potentially earn over this amount but am unlikely to reach the usual £1257. Why will I have to pay tax when I should be able to earn over £1000 interest tax free as on low income? It doesn't make sense to me.

What does your latest payslip show your taxable earnings are?  How often are you paid?

What do you expect your P60 to show your earnings as for 2025/26?

I get paid every 4 weeks. My taxable so far is just over £7000 but I'm expecting that to go up by about £1000 tomorrow. I think my earnings for the year will be roughly £12000. Thanks

So your tax code has been changed like that as you can only use the two 0% tax bands for interest once you have used your Personal Allowance.

And based on your earnings so far you have spare allowances which the interest can use.

If you expect your earnings to increase your can just log into your Personal tax Account and update your estimated earnings.  If you use £12,570 then you won't have any spare allowances and your tax code will automatically revert back to 1257L within a few days.

And if you pay tax on your next payslip it will be refunded on the payslip after that (assuming your earnings are on track to be no more than £12,570).

I think i understand although it seems silly to me to tax then pay it back. If I was to update my earnings now, would it change my tax code to avoid being taxed in the first place?

When do you think your employer will be running the payroll for the next pay of £1,000?

Do you know what the tax period for that payment will be (your last payslip should have a tax week number)?

HMRC aren't mind readers, the new tax code is based on what they already know i.e. your earnings so far are well under £12,570/year.  They cannot know you might earn more between now and 5 April.  But as you do know it you can let them have an updated figure for your expected earnings.

I will get my next payslip tomorrow week 33. I'm still unsure if they think i will earn less than the 1257 why they want to lower my tax free amount?

Because, based on your current earnings, you have unused tax code allowances.  It's odd but it is what happens.

Based on what you have posted your taxable pay at week 33 will be just over £8,000 so you can expect to pay some tax, probably over £100.

But if you update your expected earnings now you can expect to get that refunded at week 37 (assuming your taxable pay at week 37 is no more than £8,950).

QueenieK

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Hi, I'm on a low income of around 11K but with the opportunity of earning a small amount extra in overtime so currently don't pay tax. I have some savings and I earn a little over £1000 a year. I was under the impression that because of my income I qualify for the £1000 psa plus the £5000 starting savings rate so I shouldn't have to pay any tax on the interest I earn on my savings. 

HMRC have just told me they've changed my tax code from 1257L to 1162L and that they have deducted £944 for untaxed interest on savings. I don't understand this at all. I could potentially earn over this amount but am unlikely to reach the usual £1257. Why will I have to pay tax when I should be able to earn over £1000 interest tax free as on low income? It doesn't make sense to me.

What does your latest payslip show your taxable earnings are?  How often are you paid?

What do you expect your P60 to show your earnings as for 2025/26?

I get paid every 4 weeks. My taxable so far is just over £7000 but I'm expecting that to go up by about £1000 tomorrow. I think my earnings for the year will be roughly £12000. Thanks

So your tax code has been changed like that as you can only use the two 0% tax bands for interest once you have used your Personal Allowance.

And based on your earnings so far you have spare allowances which the interest can use.

If you expect your earnings to increase your can just log into your Personal tax Account and update your estimated earnings.  If you use £12,570 then you won't have any spare allowances and your tax code will automatically revert back to 1257L within a few days.

And if you pay tax on your next payslip it will be refunded on the payslip after that (assuming your earnings are on track to be no more than £12,570).

I think i understand although it seems silly to me to tax then pay it back. If I was to update my earnings now, would it change my tax code to avoid being taxed in the first place?

When do you think your employer will be running the payroll for the next pay of £1,000?

Do you know what the tax period for that payment will be (your last payslip should have a tax week number)?

HMRC aren't mind readers, the new tax code is based on what they already know i.e. your earnings so far are well under £12,570/year.  They cannot know you might earn more between now and 5 April.  But as you do know it you can let them have an updated figure for your expected earnings.

I will get my next payslip tomorrow week 33. I'm still unsure if they think i will earn less than the 1257 why they want to lower my tax free amount?

Because, based on your current earnings, you have unused tax code allowances.  It's odd but it is what happens.

Based on what you have posted your taxable pay at week 33 will be just over £8,000 so you can expect to pay some tax, probably over £100.

But if you update your expected earnings now you can expect to get that refunded at week 37 (assuming your taxable pay at week 37 is no more than £8,950).

Thank you for taking the time to explain this to me. I think I understand the logic even though it seems backward to my way of thinking!

sheramber

Personal allowances are used to cover the interest before the savings allowance. 

chrisbur

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Dazed_and_C0nfused said:

QueenieK said:

Hi, I'm on a low income of around 11K but with the opportunity of earning a small amount extra in overtime so currently don't pay tax. I have some savings and I earn a little over £1000 a year. I was under the impression that because of my income I qualify for the £1000 psa plus the £5000 starting savings rate so I shouldn't have to pay any tax on the interest I earn on my savings. 

HMRC have just told me they've changed my tax code from 1257L to 1162L and that they have deducted £944 for untaxed interest on savings. I don't understand this at all. I could potentially earn over this amount but am unlikely to reach the usual £1257. Why will I have to pay tax when I should be able to earn over £1000 interest tax free as on low income? It doesn't make sense to me.

What does your latest payslip show your taxable earnings are?  How often are you paid?

What do you expect your P60 to show your earnings as for 2025/26?

I get paid every 4 weeks. My taxable so far is just over £7000 but I'm expecting that to go up by about £1000 tomorrow. I think my earnings for the year will be roughly £12000. Thanks

So your tax code has been changed like that as you can only use the two 0% tax bands for interest once you have used your Personal Allowance.

And based on your earnings so far you have spare allowances which the interest can use.

If you expect your earnings to increase your can just log into your Personal tax Account and update your estimated earnings.  If you use £12,570 then you won't have any spare allowances and your tax code will automatically revert back to 1257L within a few days.

And if you pay tax on your next payslip it will be refunded on the payslip after that (assuming your earnings are on track to be no more than £12,570).

I think i understand although it seems silly to me to tax then pay it back. If I was to update my earnings now, would it change my tax code to avoid being taxed in the first place?

When do you think your employer will be running the payroll for the next pay of £1,000?

Do you know what the tax period for that payment will be (your last payslip should have a tax week number)?

HMRC aren't mind readers, the new tax code is based on what they already know i.e. your earnings so far are well under £12,570/year.  They cannot know you might earn more between now and 5 April.  But as you do know it you can let them have an updated figure for your expected earnings.

I will get my next payslip tomorrow week 33. I'm still unsure if they think i will earn less than the 1257 why they want to lower my tax free amount?

As you are paid four weekly I assume that your last payslip was for week 32 so your payslip today should be for week 36, which covers payments made from 16/11 to 13/12.