[Misc] PAYE Tax Code question.

[Springal]

Collective - to avoid a probably lengthy wait to speak to HMRC - does anyone know within your PAYE tax code - when there is a summary of how that code is made up on the HMRC website , it has a number for private pension contributions (something I’ve made in previous tax years and presumably assumption is made I’d make the same again this year)

Does anyone know if that number is the total private pension contribution expected - or the total of the tax relief I’d get for whatever pension contribution ?

 

[Eric the meek]

Collective - to avoid a probably lengthy wait to speak to HMRC - does anyone know within your PAYE tax code - when there is a summary of how that code is made up on the HMRC website , it has a number for private pension contributions (something I’ve made in previous tax years and presumably assumption is made I’d make the same again this year)

Does anyone know if that number is the total private pension contribution expected - or the total of the tax relief I’d get for whatever pension contribution ?

Neither. It's the amount of tax-free income you will receive before tax is applied.

Tax codes

What tax codes are, how they're worked out, and what to do if you think your code is wrong.

www.gov.uk

 

[Springal]

Neither. It's the amount of tax-free income you will receive before tax is applied.

Tax codes

What tax codes are, how they're worked out, and what to do if you think your code is wrong.

www.gov.uk

But on the HMRC website you can add ‘things’ that might affect your tax code (other jobs , work benefits etc) and one field is private pension contributions ?

 

[Eric the meek]

But on the HMRC website you can add ‘things’ that might affect your tax code (other jobs , work benefits etc) and one field is private pension contributions ?

I've never used that function, but all that makes sense. You get tax relief on private pension contributions, so if you want to receive that tax relief through your tax code, that is how you would do it. You would see the figure of tax free income increase.

 

[phoenix]

The government have chased me all around the world and back making phone calls and sending letters. Why oh yes! because i wasn't aware i had to tell them i had a pay rise on my early pension turns out i owe them £0.54p a week back dated to April so i'm already p to over £21 congratulations lads and Lasses you caught a bad un there.

 

[phoenix]

Deleted its safer this way.

 

[Springal]

I've never used that function, but all that makes sense. You get tax relief on private pension contributions, so if you want to receive that tax relief through your tax code, that is how you would do it. You would see the figure of tax free income increase.

So presumably it’s the tax relief amount - not the total private pension contribution made ? I

 

[Eric the meek]

As an aside, the tax year before last, I submitted my tax return early in December, well before the Jan 31st deadline. My pension provider informed me that HMRC had made an - extremely - adverse change to my tax code, between Christmas and New Year, to take predicted tax owed well in advance.

I assumed that someone in HMRC, was working between those dates, didn't want to be there, saw my income, and thought they would 'have that bastard'.

Lesson learned.

Now I don't submit my tax return until the last moment in January, so that it is lost in the avalanche of everyone else's tax returns at the end of January. HMRC can wait for my tax.

 

[Eric the meek]

So presumably it’s the tax relief amount - not the total private pension contribution made ? I

It's in the link I gave you.

'The numbers in your tax code tell your employer or pension provider how much tax-free income you get in that tax year.'

So it is not the 'tax relief'. To be precise, it is the amount of tax-free income you will receive before income tax is applied at your marginal rate of income tax.

 

[warmleyseagull]

So presumably it’s the tax relief amount - not the total private pension contribution made ? I

sort of. HMRC use PAYE codes in particular for folk who don't need to complete tax returns, partly so they don't have to complete one and also to smooth the effect of changes throughout the tax year. The base is the tax free allowance; to which they add any allowances such as pension contributions that are 100% deductible, and deduct any additional compensation (e g tips estimate) and P11D remuneration (items paid by employer in lieu of salary, notable company cars and private health premiums).

In simple cases you can work out the value of the constituent items but in many cases there is a blurring of tax years (HMRC may use tax codes in 23/24 to claw back tax, say, on P11D paid in 22/23) and confusion because many people have more than one employment. As more people tip into higher rates, it becomes even more arcane because some deductions, notably charity donations, receive only higher rate relief, the basic rate being granted at source. The complexity of tax legislation and the rise of folk having multi employments means, I think, that we shall have to do tax returns as a rule rather than by exception.

I favour everyone doing their own tax computation using the simple step by step programs like TaxCalc that are available for low cost. It really isn't difficult and gives you the comfort of knowing that your tax is more or less right, or to take up with HMRC if not. The HMRC are so inefficient that they couldn't even get my State Pension correct!