Change to tax code

Giant1266

Hello, I had an email from HMRC to say my tax code has changed from 1257L to 1247L.

I'm now paying more tax per month, the reason given for it changing is: You now get untaxed interest on savings and investments worth £97.

I'm not understanding how this now means I pay more tax, is anyone able to provide any further guidance on why my tax code may have changed? As my job or anything linked to my job hasn't changed like pay etc. 

Appreciate any replies, apologies if anything I've asked is silly, not the best when it comes to tax codes. 

Albermarle

Your tax code has been changed to take account of > You now get untaxed interest on savings and investments worth £97.
The extra tax will be less than £2 a month .

molerat

Will you receive in excess of £1000 savings interest or in excess of £500 dividend income this year ?

eskbanker

Giant1266 said:

Hello, I had an email from HMRC to say my tax code has changed from 1257L to 1247L.

I'm now paying more tax per month, the reason given for it changing is: You now get untaxed interest on savings and investments worth £97.

I'm not understanding how this now means I pay more tax, is anyone able to provide any further guidance on why my tax code may have changed? As my job or anything linked to my job hasn't changed like pay etc. 

Appreciate any replies, apologies if anything I've asked is silly, not the best when it comes to tax codes. 

In terms of how you pay more, tax codes are used to deduct tax at source from PAYE payments, such as employment or pension income, so before this change, you'd have tax deducted from that income once it exceeds £12,570 a year, whereas afterwards, it'll be the excess over £12,470 that incurs tax.

If you're able and willing to share your 2024/25 tax calculation, posters should be able to shed more light on why the coding has changed....

Giant1266

molerat said:

Will you receive in excess of £1000 savings interest or in excess of £500 dividend income this year ?

No, I have a cash ISA where I receive interest but this is tax free and separate to my account where I receive my monthly salary. 

Giant1266

Albermarle said:

Your tax code has been changed to take account of > You now get untaxed interest on savings and investments worth £97.
The extra tax will be less than £2 a month .

I’m receiving £15 less per month when comparing my December pay to my November pay 

chrisbur

Giant1266 said:

Albermarle said:

Your tax code has been changed to take account of > You now get untaxed interest on savings and investments worth £97.
The extra tax will be less than £2 a month .

I’m receiving £15 less per month when comparing my December pay to my November pay 

This indicates that the tax code has been applied on a cumulative basis, and so has been backdated to the start of the tax year.  This has resulted in most of the extra tax being taken from the December payday and the rest will be deducted at about 1.66 (average figure) a month for the last three months.  
HMRC could have done it by reducing the tax code by a higher figure which would be applied on a non-cumulative basis and so would have spread the extra tax equally over the last four months of the tax year.  I assume that as it is a fairly small adjustment they chose this method.  Either way the end result would have been the same.  

Giant1266

chrisbur said:

Giant1266 said:

Albermarle said:

Your tax code has been changed to take account of > You now get untaxed interest on savings and investments worth £97.
The extra tax will be less than £2 a month .

I’m receiving £15 less per month when comparing my December pay to my November pay 

This indicates that the tax code has been applied on a cumulative basis, and so has been backdated to the start of the tax year.  This has resulted in most of the extra tax being taken from the December payday and the rest will be deducted at about 1.66 (average figure) a month for the last three months.  
HMRC could have done it by reducing the tax code by a higher figure which would be applied on a non-cumulative basis and so would have spread the extra tax equally over the last four months of the tax year.  I assume that as it is a fairly small adjustment they chose this method.  Either way the end result would have been the same.  

Thanks for the response and info, but I'm still confused as to why my tax code has changed. 

The untaxed interest on saving and investments worth £97 line I was told - I thought you don't pay any tax on savings interest unless it exceeds £1000, which my current account doesn't. 

eskbanker

Giant1266 said:

molerat said:

Will you receive in excess of £1000 savings interest or in excess of £500 dividend income this year ?

No, I have a cash ISA where I receive interest but this is tax free and separate to my account where I receive my monthly salary. 

Your cash ISA isn't with Zopa by any chance?  There's a reported issue where they submitted erroneous data to HMRC as if such accounts were taxable.

Giant1266 said:

Thanks for the response and info, but I'm still confused as to why my tax code has changed. 

The untaxed interest on saving and investments worth £97 line I was told - I thought you don't pay any tax on savings interest unless it exceeds £1000, which my current account doesn't. 

What information are you prepared to share about your income for 2024/25 and 2025/26?  It should eliminate at least some of the guesswork....

molerat

Is your estimated income in your on line tax account correct and uses up all of your tax allowance ?

WindfallWendy

I have been informed my tax code for 26/27 will change because they have decided I will get £4500 on untaxed income next tax year. I definitely know I will not get this as the only untaxed income I will get is interest and that isn't even forecast to be £3000 this year, so will be even less left year (when I shove a chunk of currently interest generating cash into an ISA).

I did get untaxed income in 24/25 from rental property but I told them that I'd sold the house back in October 2024, and no longer expected to recieve rental income. I intend to do a SA whilst my interest generating accounts are proving this level of additional income, to help me keep on top of my income tax owing position.

I can't find any way to flag "I disagree!" to HMRC, and would rather keep doing a tax return and pay my tax annually rather than have my tax code change for PAYE.

Is this unreasonable?