Effect of new tax code

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lindabea
lindabea Posts: 1,477 Forumite
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in Cutting tax
My partner's tax code has just been changed to K35; would he be paying an extra £350 in tax or £70(ie 20%of £350). Just trying to understand the implication of this as he never had a K code before.
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  • pcman1985
    pcman1985 Posts: 181 Forumite
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    He will pay 20% of £350 a year, so £70
    Plus 20% of his earnings up until it hits the 40% rate.

    Say he earns £25000 a year that will be tax payment of £5070.

    Any reason why his tax code is so low?
  • HaveAGo
    HaveAGo Posts: 30 Forumite
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    What was the code before?

    What is monthly income before tax?
  • lindabea
    lindabea Posts: 1,477 Forumite
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    pcman1985 wrote: »
    He will pay 20% of £350 a year, so £70
    Plus 20% of his earnings up until it hits the 40% rate.

    Say he earns £25000 a year that will be tax payment of £5070.

    Any reason why his tax code is so low?

    Probably due to the interest earned on savings income has increased in 17-18.
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  • 00ec25
    00ec25 Posts: 9,123 Forumite
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    edited 16 January 2019 at 7:32PM
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    lindabea wrote: »
    Probably due to the interest earned on savings income has increased in 17-18.
    rather unlikely

    have you read any of the websites that explain what a tax code means?

    the tax free allowance for 17/18 is 11,850
    that means you will only pay tax if your total income, form all sources is greater than that, so that converts to a tax code 1185. Note there is no letter in front of it

    putting a k in front of the code is a huge change as it means he get zero tax free, so the 11,850 vanishes, PLUS, as far as HMRC are concerned, he owes tax to them, so they have made his code positive.... k350 means he must add 3,500 on top of whatever income he gets and then the whole lot will be taxed at his marginal tax rate.

    That means HMRC will tax him on at least 11,850 + 3,500 = 15,350 because at basic rate tax that means he will have to pay at least £3,070 in tax (£256 per month). So HMRC are saying he owes them at least that much tax and one way for them to collect it is via his tax code.

    is he likely to be getting 15, 000+ of taxable interest? If he is, he should have used tax free savings plans!
  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    To be fair we have absolutely no idea what the previous tax code was. It may have been 1L.
    With the op's partner having a costly company car. Or is getting a largish State Pension. Or any number of other things.

    The change to K35 may actually just be a fairly small change.

    But until the op provides some more detailed information it's all guesswork.

    As is often the case with this type of thread :o
  • lindabea
    lindabea Posts: 1,477 Forumite
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    00ec25 wrote: »
    putting a k in front of the code is a huge change as it means he get zero tax free, so the 11,850 vanishes, PLUS, as far as HMRC are concerned, he owes tax to them, so they have made his code positive.... k350 means he must add 3,500 on top of whatever income he gets and then the whole lot will be taxed at his marginal tax rate.

    That means HMRC will tax him on at least 11,850 + 3,500 = 15,350 because at basic rate tax that means he will have to pay at least £3,070 in tax (£256 per month). So HMRC are saying he owes them at least that much tax and one way for them to collect it is via his tax code.

    is he likely to be getting 15, 000+ of taxable interest? If he is, he should have used tax free savings plans!

    I think you have misread my OP... I said his code is K35 not K350, so as already explained, his extra tax will be £70. Not a huge amount. His previous tax code was 57L as all his P/A is taken up by his state pension and a couple of pension annuities.

    But can he ask HMRC to leave his tax code without taking into account his savings interest and settle the extra tax due to savings interest at year end. What they seem to have done is assessed his savings interest for 19/20 and included it as part of income. Consequently, he is paying the tax on savings income out of his pension. We'd rather pay it in full when we know the actual amount.
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  • Dazed_and_confused
    Dazed_and_confused Posts: 6,458 Forumite
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    Moving from 57L to K35 is usually a swing of about £185 additional tax, not £70 (allowances changing from 570'ish to -350 (x 20%).
  • lindabea
    lindabea Posts: 1,477 Forumite
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    Dazed_and_confused wrote: »
    Moving from 57L to K35 is usually a swing of about £185 additional tax, not £70 (allowances changing from 570'ish to -350 (x 20%).

    Thank you - I do accept your point, but in my original question, I was more concerned with the 'extra' tax that the K35 code alone would incur. I do understand that there is also the loss of the 57L portion. (ie 115+70)

    Thank you everyone for your replies.
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