Second Job - Higher rate tax query

mvteng · 23 April 2018 at 4:19PM

This is a little bit complicated, but I'll initially keep it as simple as I can.

I have started a second job. The total annual income I have for both jobs pushes me (just) into the higher tax band.

However, HMRC have issued a higher rate tax code to my second employer i.e. I will pay higher rate tax on all of my earnings from my second employment, when only a small amount of my total earnings should be at higher rate.

1/ Are they correct in issuing a higher tax code to my second employer? (I understand a part of my salary should be taxed at higher rate, but the majority shouldnt be)

2/ Can I apply to have a standard tax code applied to my second job?

3/ As it stands, at the end of the year, I will have paid too much tax, will this be refunded automatically? or how do I claim it back?

4/ Potentially, the same situation will happen next year. Is there a way of fixing it?

Thanks in advance

[Deleted User] · 23 April 2018 at 4:52PM

I had this situation a few years ago and was able to sort it out (although my background in tax probably helped!)

I would ask that your second job be taxed at basic rate (20%). This will result in an underpayment which can be estimated. Your PAYE code at your main source can be adjusted to collect this 'potential underpayment' through the year. Not an exact science but better than the option that you currently have.

Dazed_and_confused · 23 April 2018 at 7:00PM

1/ Are they correct in issuing a higher tax code to my second employer? (I understand a part of my salary should be taxed at higher rate, but the majority shouldnt be)
No

2/ Can I apply to have a standard tax code applied to my second job?
No. You only get one Personal Allowance which is clearly being used at your original job.

3/ As it stands, at the end of the year, I will have paid too much tax, will this be refunded automatically? or how do I claim it back?
Unless you need to complete a Self Assessment tax return it would be refunded automatically sometime between the end of the tax year and November

4/ Potentially, the same situation will happen next year. Is there a way of fixing it?
Yes.

I think your first step is to check your personal tax account on gov.uk and see what HMRC estimate your earnings will be from each job. It sounds like they think you will be over the higher rate threshold at your original job when you obviously believe/know otherwise so it may be as simple as updating your expected earnings for each job to see if this affects your tax code. I believe you can do this on your personal tax account.

If you don't earn enough to pay higher rate tax on your original job then you would end up with a BR (basic rate) tax code on your new job and have an adjustment included in the tax code of your original job so that a bit of extra tax is deducted but from your original job but this would be less than the extra 20% the "D0" tax code you have presumably received would leave you paying.

Remember a tax code is only a provisional attempt at collecting the correct amount of tax so as things fluctuate during the year, pay rises, bonuses etc chances are there will be some sort of adjustment due after the tax year is finished.

By changing things (which would be perfectly understandable) you have the possibility of owing HMRC rather than them owing you.

mvteng · 24 April 2018 at 9:07AM

Many thanks Purdyoaten2 and Dazed & Confused.

I had suspected I would need to discuss with HMRC, but wanted to get some opinions before I did so

dori2o · 27 April 2018 at 8:31PM

There are 2 reasons why a D0 code will have been issued. Either HMRC have an estimate of your income and benefits at your first job of more than £46350, or, they dont have an accurate estimate of your income at the 2nd job.

Sign in to your personal tax account and update your estimated pay for 18/19. This will force the system to recalculate your code.

Second Job - Higher rate tax query

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