Tax Code

[tearinghair]

I'm struggling to understand my tax code for the next year. If it's changed from 814L to 770L, is that better or worse? I have to pay a smallish amount of additional tax, but that doesn't seem to equate with what seems like quite a large change in code.

[bhg481]

It's worse. Are you a pensioner; if so it will reflect the increase in your pension. Old age pension isn't taxed directly but it's added to any other income you have for tax purposes.

[tearinghair]

Thank you, yes; that would explain it. I can hardly wait for my 25p per week extra later this year when I reach 80.

[bhg481]

Because the tax codes haven't increase with inflation this year the whole of your pension increase will be subject to 20% tax.

[tearinghair]

It's always been a mystery to me, I usually just go along with the annual code, trusting that swings and roundabouts will get it about right. I haven't had to send in a tax return fior several years now.

[youngmafbog]

814L means you have an allowance of £8140 before you start paying income tax (nothing to do with NI). 770L means you only have £7700 before you start paying tax, so yes in real money you are worse off by £440 * the highest tax rate you pay at.

[ToraToraTora]

The standard tax code is 1257L which means that the first £12570 of income is tax free. The fact that yours is 814L (£8140) going to 770L (£7700) implies that they are collecting past tax underpayments via the tax code. Generally for non K codes just replace the last letter with a zero and that is your tax free allowance.

[tearinghair]

I haven't underpaid tax. My HMRC page says that I paid the right amount last year. The only differences other than pension payments, are that I now Gift Aid a larger amount each year than the last time they had a tax return, and that my royalty payments have dropped to almost nothing as my various A level revision guides are now out of print. But as they don't want a tax return, they won't know either of those facts.

[ToraToraTora]

In that case I'd contact the IR and find out why your tax code is not the standard one, looks to me as if you are paying too much tax. There may be a reason for it, they use the tax code to collect that they think you owe rather than demanding it all at once.

[ToraToraTora]

Can you post a picture of your last notice of coding? Make sure you obscure personal details.

[tearinghair]

I can't find it at the moment, it's not in the folder where it ought to be. I'll need to look through a whole drawer-full to see where I've mis-filed it. In the words of Captain Oates, I may be some time.

[Canary42]

I've never trusted HMRC - not since they sent me a refund of £512 then a few days later sent me a demand for £512.

[bobbinwales]

Surely the coding notice will say what the adjustment is for.
Or set up online tax account...you can see a breakdown and cam use online chat to query any thing

[Prudie]

I'm the first to admit I find thus complicated but I do know that having a code lower than the standard 1257L does not mean they are grabbing back unpaid tax, I am in a similar position, it means you are getting pension and other income all at the same time. For instance if you get the state pension (let's say 9K a year as an example) while you are working that is taken off the 12750 free allowance and brings the tax free number down to 375L.

[kuiperbelt]

\can hardly wait for my 25p per week extra later this year\

You can look forward to 10.1% increase on your state pension too :-)

[tearinghair]

That's true, kuiperbelt, I'm absolutely not belittling that, I'll be very grateful for it. But I would question the point of adding 25p per week just for reaching 80, I'd be happy not to have it if I knew it would be going somewhere worthwhile in every case. As it is I'll save it and wait for DEC's next appeal.

[bhg481]

tearinghair - don't get over-exited about the 25p; remember that 5p will go in tax, so you'll only be 20p a week better off. Don't spend it all at once!

[bobbinwales]

Trouble is if they stop the 25p there will be seen as uncaring if they put it up to say £1 people will say its a pittance. Put it up to £5 maybe . But do we need more money at 80 or less...I won't be going on holidays or out for meals or buying clothes or going to football matches ect at 80

[kuiperbelt]

\But do we need more money at 80\

There is a school of thought that believes one can never have enough money!!

[Skyline D]

@Prudie - Well no, it might mean that. It might mean unpaid tax from previous years and it might mean any number of other different things. It just means your tax code has been adjusted for some reason. Not everybody's tax code will be adjusted the same way yours is.

[barry1010]

You won't be worse off by £440, you will pay tax on £440.