K Tax Code Query

squidley

Apologies for another K Tax code query.

Been on PAYE all my working life. Now retired with a pension of approx £20k per year. I do not yet get my state pension. 

I have just received a letter from HMRC saying I owe approx £950 in tax from year 24/25. I assume this is due to interest I received from savings (which were quite high for a period around moving house). 

The letter states my tax code has changed from to K24X (from 1026L).

I can't really make head or tail of this. Should I have any concerns or is this standard practice when tax is owed. 

Grateful for any advice. 

Dazed_and_C0nfused

squidley said:

Apologies for another K Tax code query.

Been on PAYE all my working life. Now retired with a pension of approx £20k per year. I do not yet get my state pension. 

I have just received a letter from HMRC saying I owe approx £950 in tax from year 24/25. I assume this is due to interest I received from savings (which were quite high for a period around moving house). 

The letter states my tax code has changed from to K24X (from 1026L).

I can't really make head or tail of this. Should I have any concerns or is this standard practice when tax is owed. 

Grateful for any advice. 

It's almost certainly not got anything to do with the tax owed from 2024/25.

The reduced tax code will be because HMRC are estimating that you will get the same interest again this tax year as you did in 2024/25.

Does the tax code refer to an underpayment from a prior year or this tax year 🤔

It will all come out in the wash if you pay too much as a result of this estimate but you can provide your own estimate if you think it is excessive for this tax year.  But expect to have to provide figures for each individual bank account, not just a single new total.

molerat

K24X means you have a negative coded amount and will be taxed on £20.75 on top of your income each month andno tax free amount so an extra £876. This means the extra tax deducted each month will be around £175, £175 x 4 = £700.  Have they used a correct estimate for interest for this year ?

Ommbiance

Also, the X means you are on emergency tax, so they're unable to apply the correct tax code for some reason until they've got the 'missing' info

chrisbur

Ommbiance said:

Also, the X means you are on emergency tax, so they're unable to apply the correct tax code for some reason until they've got the 'missing' info

Nothing to do with emergency tax code.  HMRC always use a non-cumulative (X) code when they lower someone's tax code during the tax year  If they used a cumulative tax code the change would be backdated to the start of the tax year.  This would mean a different tax code would be used to give the same result but the bulk of the extra tax would be taken from the first payday after the code was implemented, and a much smaller amount of extra tax from the following paydays. By using a non-cumulative tax code the extra tax to be taken will be spread evenly over the paydays following the code being applied. 
Essentially either system could be used but with the non-cumulative code the extra just gets spread out evenly.

squidley

Thank you all for your helpful comments. I apologise for the delay in replying.  

Never having had any tax issues before it's not the easiest thing to understand. The letter definitely states I owe approx £950 for the tax year 24/25 but adds " we are already collecting part of the tax in equal installments". Looking on the hmrc app I see for 25/26 my my tax free amount is now minus £250. 

This is something I've clearly got to get to grips with. I will have to start by making a detailed note of all my earnings over the past few years. 

In general terms are these calculations from HMRC pretty reliable? Especially bearing in mind my only income is from a pension and savings interest.

Also, about this time last I received my first ever "you owe us money" letter from HMRC. It was for about £500. I opted to pay it off as a single payment to HMRC. Again, in general terms, do people think it is advisable to pay off these things in lump sums or let HMRC take it by monthly installments. Or is it much of a muchness.  

Thanks. 

Yorkie1

It is often commented that paying it off before you have to, essentially means that you are losing the possibility of interest on the money which would otherwise be retained in your bank accounts for longer.

Dazed_and_C0nfused

squidley said:

Thank you all for your helpful comments. I apologise for the delay in replying.  

Never having had any tax issues before it's not the easiest thing to understand. The letter definitely states I owe approx £950 for the tax year 24/25 but adds " we are already collecting part of the tax in equal installments". Looking on the hmrc app I see for 25/26 my my tax free amount is now minus £250. 

This is something I've clearly got to get to grips with. I will have to start by making a detailed note of all my earnings over the past few years. 

In general terms are these calculations from HMRC pretty reliable? Especially bearing in mind my only income is from a pension and savings interest.

Also, about this time last I received my first ever "you owe us money" letter from HMRC. It was for about £500. I opted to pay it off as a single payment to HMRC. Again, in general terms, do people think it is advisable to pay off these things in lump sums or let HMRC take it by monthly installments. Or is it much of a muchness.  

Thanks. 

Assuming you are referring to a P800 calculation then it generally makes things simpler to follow if you pay the tax owed rather than having your tax code amended to collect it.

But as @Yorkie1 points out that isn't necessarily the best option financially.