Tax Confusion

Happy_Minion

I got my tax demand for 2024/25 the end of November and paid the £661 online. Last week my tax code was reduced to 297L to collect a similar amount which I'm taking to cover interest earned in 2025/26 before the end of the tax year.

I'm hoping that this will mean the tax code I get for 2026/27 will be a much more accurate number with only a minor adjustment due to more of my cash being in an ISA and lower interest rates.

Dazed_and_C0nfused

Happy_Minion said:

I got my tax demand for 2024/25 the end of November and paid the £661 online. Last week my tax code was reduced to 297L to collect a similar amount which I'm taking to cover interest earned in 2025/26 before the end of the tax year.

I'm hoping that this will mean the tax code I get for 2026/27 will be a much more accurate number with only a minor adjustment due to more of my cash being in an ISA and lower interest rates.

That is highly unlikely.

Your initial 2026/27 code will almost certainly use the exact same estimate as your new 2025/26 tax code.

But if you know the 2026/27 interest is going to be less than the estimate HMRC use in calculating your code you are able to give them your own estimate.

Happy_Minion

Dazed_and_C0nfused said:

Happy_Minion said:

I got my tax demand for 2024/25 the end of November and paid the £661 online. Last week my tax code was reduced to 297L to collect a similar amount which I'm taking to cover interest earned in 2025/26 before the end of the tax year.

I'm hoping that this will mean the tax code I get for 2026/27 will be a much more accurate number with only a minor adjustment due to more of my cash being in an ISA and lower interest rates.

That is highly unlikely.

Your initial 2026/27 code will almost certainly use the exact same estimate as your new 2025/26 tax code.

But if you know the 2026/27 interest is going to be less than the estimate HMRC use in calculating your code you are able to give them your own estimate.

My tax code for 2024/25 used an estimate for Untaxed Interest of £1307. The actual amount came in at £4464 so I was due £633 which I paid online.

They have changed my code for the rest of 2025/26 to 297L to collect their estimate of £415 which I would be due on the update estimated interest before the end of tax year.

Will my tax code for next year not be £12570-£4464 = £8108 so 810L?

Dazed_and_C0nfused

Happy_Minion said:

Dazed_and_C0nfused said:

Happy_Minion said:

I got my tax demand for 2024/25 the end of November and paid the £661 online. Last week my tax code was reduced to 297L to collect a similar amount which I'm taking to cover interest earned in 2025/26 before the end of the tax year.

I'm hoping that this will mean the tax code I get for 2026/27 will be a much more accurate number with only a minor adjustment due to more of my cash being in an ISA and lower interest rates.

That is highly unlikely.

Your initial 2026/27 code will almost certainly use the exact same estimate as your new 2025/26 tax code.

But if you know the 2026/27 interest is going to be less than the estimate HMRC use in calculating your code you are able to give them your own estimate.

My tax code for 2024/25 used an estimate for Untaxed Interest of £1307. The actual amount came in at £4464 so I was due £633 which I paid online.

They have changed my code for the rest of 2025/26 to 297L to collect their estimate of £415 which I would be due on the update estimated interest before the end of tax year.

Will my tax code for next year not be £12570-£4464 = £8108 so 810L?

Are you an additional rate (45%) payer?

If not and your actual 2024/25 interest was £4,464 then you would normally expect the tax code entry to be £3,464 or £3,964 as £500 or £1,000 will be taxed at 0%.

But if you have paid the £661 direct to HMRC and the £415 is the whole of the estimated tax owed for this tax year then you wouldn't need a tax owed entry in your 2026/27 tax code.  

Don't expect the interest element in your initial 2026/27 tax code to be changed for these reasons though.

a minor adjustment due to more of my cash being in an ISA and lower interest rates.

poblomov

Happy_Minion said:

My tax code for 2024/25 used an estimate for Untaxed Interest of £1307. The actual amount came in at £4464 so I was due £633 which I paid online.

They have changed my code for the rest of 2025/26 to 297L to collect their estimate of £415 which I would be due on the update estimated interest before the end of tax year.

Will my tax code for next year not be £12570-£4464 = £8108 so 810L?

What was your 2025/26 code before 297L?

Happy_Minion

poblomov said:

Happy_Minion said:

My tax code for 2024/25 used an estimate for Untaxed Interest of £1307. The actual amount came in at £4464 so I was due £633 which I paid online.

They have changed my code for the rest of 2025/26 to 297L to collect their estimate of £415 which I would be due on the update estimated interest before the end of tax year.

Will my tax code for next year not be £12570-£4464 = £8108 so 810L?

What was your 2025/26 code before 297L?

2025/26 code was 1232L before it changed.

poblomov

Happy_Minion said:

2025/26 code was 1232L before it changed.

How's the 297L made up? Something like

Personal Allowance                     12,570
Untaxed savings                             4,464
Estimated tax adjustment             5,131

Happy_Minion

poblomov said:

Happy_Minion said:

2025/26 code was 1232L before it changed.

How's the 297L made up? Something like

Personal Allowance                     12,570
Untaxed savings                             4,464
Estimated tax adjustment             5,131

Personal allowance     £12570
Untaxed savings           £3464
Estimated tax you owe £6232

I assume they need to adjust it by £6232 to collect the £413 tax over 16 weeks instead of 52.
My first wage with the new code was £36 less than previously which would come to an extra £576 taken before the end of the tax year, £163 more than they estimate I owe but £57 less than I had to pay for 2024/25.

So using this years actual interest for next year my code should be £12570-£3464=£9106 (910L)

Dazed_and_C0nfused

Happy_Minion said:

poblomov said:

Happy_Minion said:

2025/26 code was 1232L before it changed.

How's the 297L made up? Something like

Personal Allowance                     12,570
Untaxed savings                             4,464
Estimated tax adjustment             5,131

Personal allowance     £12570
Untaxed savings           £3464
Estimated tax you owe £6232

I assume they need to adjust it by £6232 to collect the £413 tax over 16 weeks instead of 52.
My first wage with the new code was £36 less than previously which would come to an extra £576 taken before the end of the tax year, £163 more than they estimate I owe but £57 less than I had to pay for 2024/25.

So using this years actual interest for next year my code should be £12570-£3464=£9106 (910L)

That looks right.  If it turns out you owe anything extra for 2025/26 then that will be included in your 2027/28 tax code (unless you pay it direct to HMRC).