'It's time to explain tax codes in plain English' blog discussion

Former_MSE_Penelope · 26 November 2010 at 12:56PM

This is the discussion to link on the back of Martin's blog. Please read the blog first, as this discussion follows it.

Read Martin's "It's time to explain tax codes in plain English" blog discussion" Blog.

Please click 'post reply' to discuss below.

slbhill · 26 November 2010 at 1:25PM

I agree. The terminology can make a big difference to understanding.

When I had my first full time job I saw that my tax code was "BR", looked it up and found that BR stands for Basic Rate. I thought that sounded perfectly reasonable and didn't investigate any further! It was over a year before I realised how much I had been overcharged. As it happened it didn't cause me a problem (got a nice refund - kind of enforced saving) but other people as clueless as I was may not be so lucky.

niccatw · 26 November 2010 at 3:44PM

Thanks slbhill, you've just made my recent refund make a bit more sense! I have two jobs, one taxed at the 647L and the other at BR. I was due tax bax on professional subscriptions for my main job (647L) and my current tax code is much higher than that (for this financial year only) to incorporate the refund.

Then I also got a cheque! But that's probably the BR rate on my second job! I thought they'd gone mad and calculated a refund based on my current temporary higher rate and was worried about cashing that cheque!

I don't know how often I've read and re-read the letter "explaining" my tax code - it might as well be written in gibberish! In fact, I think it is!

Nile · 26 November 2010 at 3:47PM

I think tax is such a depressing subject. Just about everything we buy or do is taxed.:p

I agree that making the code easier to understand or replacing it with Martin's suggestion is an improvement.

Percy1983 · 26 November 2010 at 4:49PM

As an accountant I already understood it but will admit it seems most things like this are setup just to confuse the outsiders as such.

With that I don't think displaying it as a clear number will really help people understand how it works, and those who want to know will do a simple google search which will soon give the answer anyway.

Paul_Herring · 26 November 2010 at 5:19PM

Martin wrote:

In my world the code above would be:

£6,475 Standard

And it still does nothing to educate those who do not know what that £6,475 actually refers to.

Should we have an asterisk next to it, leading to small print on the back of the pay slip explaining in 4pt text what it is, and how it's used, perhaps?

All this does is remove one layer of obfuscation; it will certainly not encourage those who don't know/care what it relates to to look it up and find out. If anything, in isolation, it's likely to mislead those who can't be bothered to confirm when they think they know what it is, but what they think it is, is utterly wrong.

Those who are interested in what the tax code means can easily find out for themselves that all the L essentially means is "put a £ on the front and a 5 on the end - and that's your tax free allowance for the year." Along with learning what "tax free allowance" is. Or what K or BR means if they end up with those on their payslips instead.

MSE_Martin · 26 November 2010 at 7:36PM

Paul_Herring wrote: »

And it still does nothing to educate those who do not know what that £6,475 actually refers to.

Should we have an asterisk next to it, leading to small print on the back of the pay slip explaining in 4pt text what it is, and how it's used, perhaps?

All this does is remove one layer of obfuscation; it will certainly not encourage those who don't know/care what it relates to to look it up and find out. If anything, in isolation, it's likely to mislead those who can't be bothered to confirm when they think they know what it is, but what they think it is, is utterly wrong.

Those who are interested in what the tax code means can easily find out for themselves that all the L essentially means is "put a £ on the front and a 5 on the end - and that's your tax free allowance for the year." Along with learning what "tax free allowance" is. Or what K or BR means if they end up with those on their payslips instead.

I thought about that before hand - that it still isn't an explanation. Yet the explanation is on the back of some forms once a year.

The idea of translating it to plain english is you can at least intuitively see it refers to money and an amount. At the moment its disjointed from both of those. Of course though detailed explanations on top help too.

Paul_Herring · 26 November 2010 at 9:47PM

MSE_Martin wrote: »

The idea of translating it to plain english is you can at least intuitively see it refers to money and an amount.

Yes, but no. K9 refers to money and an amount. BR refers to money and an amount. 647L refers to money and an amount. How would you like the first two to appear?

But it's abstracted. Take 2 examples:

1) I have weird numbers and letters on my payslip
1a) I can't be bothered
1b) Oh... what do those mean? <goes and looks>

2) I have #6475[1] quid on my payslip
2a) Waaay!!!
2b) Oh.. I have 6475 quid. <silence>

Anyone who's interested in what the current numbers mean (or, typically, interested in why they're getting 1/3 of their pay removed by HMRC) has ample means to find out.

Payslips mentioning #6475 ([1]excuse the dodgy keyboard) will not encourage the *few* that would look if it was 647L but wouldn't if #6475 appeared on their payslips.

At the moment its disjointed from both of those. Of course though detailed explanations on top help too.

Who's going to force the disinterested to read the stuff on their payslips? In fact I'd be very surprised if even a substantial number of employees fall into all of:
1) They see 675 on their payslips
2) They wonder what it means.
3) They're utterly confused because 675 appears on their payslip.

Martin - how many people do you think would be more enlightened by your suggested change?

Bear in mind that
1) Most don't know their P2 code (or, for the vast majority of *everyone* it defaults to 'this year's' tax free amount.)
2) Of those that do, most don't care
3) Of those that care actually know what it means. Making this redundant.

I do realise you're trying to promote education in people that don't know what the P2 code is, but what amounts to renaming it on payslips is, IMHO, trying (and it will fail to) fix the symptom, not the problem.

Would you care to revisit the rather excellent idea to solve the problem and find a different implentation for the solution?

Please?

(And no - my cynicism remains firmly in the 'if they don't want to know, they won't be taught' camp. It is those I believe you're trying to target with this. And they(>80%) won't be told.)

Thanks for taking the time to read and reply to my comment however.

Joe_Bloggs · 27 November 2010 at 12:04AM

The more obscure/ coded the tax system then the more tax accountants can make from it. Human beings with everyday lives are not meant to be a party to understanding the labyrinthine workings of the tax system, by design. Perpetual change will ensure that only the devoted experts can keep up.

I think it is common courtesy to place a £ sign before a financial amount and display the full total rather than obscuring the magnitude of the number by hiding a digit that would reveal the true scale of the code.

J_B.

Paul_Herring · 27 November 2010 at 10:06PM

Joe_Bloggs wrote: »

The more obscure/ coded the tax system then the more tax accountants can make from it. Human beings with everyday lives are not meant to be a party to understanding the labyrinthine workings of the tax system, by design. Perpetual change will ensure that only the devoted experts can keep up.

As an individual, have you ever completed a self assesment form? Having personally done so for the past 8 years, I've found it reasonably easy using the software HMRC provide.

I think it is common courtesy to place a £ sign before a financial amount and display the full total rather than obscuring the magnitude of the number by hiding a digit that would reveal the true scale of the code.

J_B.

And would adding the pound sign (and the 5) on payslips lead to any appreciable understanding of what that number actullay is to those, thus far unaware, of what 647 means?

I don't think so.

traycee · 29 November 2010 at 12:45AM

Brilliant Martin, I think it is genius. I really like the idea. I think it could help a lot of people.

Traycee

MSE Forum

'It's time to explain tax codes in plain English' blog discussion

Replies

Iceland's helping struggling pensioners

Who can suggest a top-notch bed?

The Forum 'Ask An Expert' event