Tag: tax code

What impact does earning over £100k have on my tax code and pension allowance?

Many people don’t realise the impact of earning over £100,000.

Here are a couple things you need to know

Personal Allowance – Tax Code

Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,000 or above.

You’ll also need to do a Self Assessment tax return.

Pension Allowance Reduction

To work out if you have a reduced (tapered) annual allowance for a tax year, you’ll need to work out your:
# net income in that tax year
# pension savings in that tax year
# threshold income in that tax year
# adjusted income in that tax year

If your adjusted income is over £150,000 your annual allowance in the same tax year will be reduced.

It will not be reduced if your threshold income for that year is £110,000 or less, no matter what your adjusted income is.

For every £2 your adjusted income goes over £150,000, your annual allowance for that year reduces by £1. The minimum reduced annual allowance you can have is £10,000.

Whichever type of pension scheme you’re in (for example, a career average scheme), you’ll need to know your pension savings so you can work out both your:

# threshold income
# adjusted income

If the pension savings made in the tax year are more than your available annual allowance, you should include the excess amount on your Self Assessment return. Your available annual allowance is your reduced annual allowance plus any unused allowance from the previous 3 tax years.

This amount is added to your taxable income and you will pay Income Tax on it, at the tax rate that applies to you.

The adjusted income includes your pension contributions and for final salary or career schemes pension contributions are the increase in scheme value

steve@bicknells.net

Is your tax code correct? millions are wrong!

Tax Refund Green Blue Horizontal

Money Saving Expert reported last week

Revealed: 3.2m tax codes WRONG – check if you’re owed £1,000s

The National Audit Office found a huge number of tax code errors – our unique calc can check if you’re a victim

You’ll find your tax code on:

  • your pay slip
  • your PAYE Coding Notice – you usually get this a couple of months before the start of the tax year and you may also get one if something has changed but not everyone needs to get one
  • form P60 – you get this at the end of each tax year
  • form P45 – you get this when you leave a job

You can check your tax using this HMRC link

https://www.gov.uk/check-income-tax

If you think you code is wrong you can inform HMRC using this online form

https://online.hmrc.gov.uk/shortforms/form/P2

Check the following carefully:

  1. P60 – you get this at the end of each tax year
  2. P45 – you get this when you leave a job
  3. PAYE Coding Notice
  4. P11D Expenses and benefits
  5. P9D Expenses payments and income from which tax cannot be deducted
  6. Bank and Building society statements
  7. Pension Tax Deductions

Is your National Insurance correct?

Unlike Income Tax which is cumulative and assessed across all earnings, National Insurance starts from zero on each individual employment and you also pay National Insurance on Self Employed earnings.

So if you are a Director of multiple businesses paid as an employee its easy to see how you could over pay and you might not even realise because National Insurance is not shown on your Self Assessment Return.

You can also over pay National Insurance if you are a part time employee with multiple employers and irratic earnings, this because National Insurance is calculated on a weekly/monthly basis, not a cumulative basis and its by employer.

What you need to do

Write to HM Revenue and Customs confirming:

  • your National Insurance number
  • why you’ve overpaid
  • the tax year(s) you’ve overpaid

You should include your P60 or a statement from your employer showing the tax and National Insurance for each year you’re claiming for.

You should apply within 6 years of the tax year you’re claiming for.

HM Revenue and Customs
Payment Reconciliation
National Insurance Contributions Office
Benton Park View
Newcastle upon Tyne
NE98 1ZZ

steve@bicknells.net

5 million paid the wrong tax last year – is your tax code right?

Tax Refund Green Blue Horizontal

As reported last year by the Telegraph –

Five million people may have been billed incorrectly by HMRC.

You’ll find your tax code on:

  • your pay slip
  • your PAYE Coding Notice – you usually get this a couple of months before the start of the tax year and you may also get one if something has changed but not everyone needs to get one
  • form P60 – you get this at the end of each tax year
  • form P45 – you get this when you leave a job

Among those most likely to be affected are veterans who have taken a civilian job after leaving the Armed Forces, but who also draw a military pension. Pensioners with two pensions and those who have continued to work part-time after retirement are also more likely to be hit.

Taxpayers, who must complete their self-assessment tax returns before Jan 31, are being warned to check their paperwork again to make sure they are not affected.

Problems arise because various tax offices around Britain are failing to share information about taxpayers’ incomes on a central database.

People with more than one income, whether from pensions, PAYE employment or a mixture of the two, are being allocated their personal tax-free allowance multiple times. It means the tax codes issued for their various income sources are incorrect, so not enough tax is taken. Often the mistakes are discovered by HMRC years later, leading to unexpected tax demands. Telegraph

If you think your Tax Code is wrong you should tell HMRC as soon as possible using online form P2

https://online.hmrc.gov.uk/shortforms/form/P2

You can check how your tax using this HMRC link

https://www.gov.uk/check-income-tax

The most common tax code for tax year 2015 to 2016 is 1060L (£10,600 being the annual income tax free allowance for 2015/16) – in 2014 to 2015 it was 1000L. It’s used for most people born after 5 April 1938 with one job and no untaxed income, unpaid tax or taxable benefits (eg company car).

steve@bicknells.net

Contact Us

HMRC are going to let you tell them your tax code…

Pay Packet And Banknotes

It’s true, from April 2014, you can tell HMRC what you think your code should be by explaining why you think its wrong, here is a link to the HMRC structured E Mail

HMRC Link

This form can only be used for queries relating to your PAYE Coding Notice. Any other queries will not be answered.

HMRC aim to respond within 15 days of receiving your E Mail.

Checking your tax code

You’ll find your tax code on:

  • your pay slip
  • your PAYE Coding Notice – you usually get this a couple of months before the start of the tax year and you may also get one if something has changed but not everyone needs to get one
  • form P60 – you get this at the end of each tax year
  • form P45 – you get this when you leave a job

Your tax code can be wrong for lots of reasons so being able to sent a structured E Mail to HMRC should help to get things corrected faster.

steve@bicknells.net

Are you claiming your Flat Rate Expense Allowance tax refund?

Back in December I did a Blog about how to make your claim http://stevejbicknell.com/2011/12/20/how-to-claim-tax-relief-for-employment-expenses/

 

But many employees don’t seem to realise that they could be entitled to Flat Rate Expenses

If you have to spend money on tools or specialist clothing for your job you may be entitled to either:

  • tax relief for the actual amounts you spend
  • a flat rate deduction

Flat rate deductions are amounts that HM Revenue & Customs agreed nationally – or sometimes locally if conditions are very different – with trade unions or other bodies.

The deductions cover what’s typically spent each year by employees in different trades. For example, someone working in the clothing industry can get a deduction of £60 each year. A cabinet maker can get a deduction for £140 while the deduction for a stone mason is £120.

You don’t have to be a member of a trade union to get the deduction. You’ll also benefit from less paperwork – you won’t have to keep a record of all the individual amounts you spend.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/IncomeTax/Taxallowancesandreliefs/DG_078378

There is a full list of the Flat Rates at

http://www.hmrc.gov.uk/manuals/eimanual/EIM32712.htm

For example, I am the FD of SCA Group, we employ Scaffolders and the rate for Scaffolders is £140 per year, at 20% tax that means £28 as a tax refund.

steve@bicknells.net

Is your tax code right?

There are only a few days left to file Self Assessments for the tax year that ended on 5th April 2011 and we are rapidly approaching the end of another tax year, so have you paid too much tax? the chances are many people haven’t paid the right tax because their tax code was wrong.

Why not start by checking your tax with the HMRC Tax Checker

http://stccalculator.hmrc.gov.uk/UserDetails.aspx

Checking your tax code

You’ll find your tax code on:

  • your pay slip
  • your PAYE Coding Notice – you usually get this a couple of months before the start of the tax year and you may also get one if something has changed but not everyone needs to get one
  • form P60 – you get this at the end of each tax year
  • form P45 – you get this when you leave a job

If you’re enrolled for Self Assessment Online, you can view PAYE Coding Notices issued on or after 11 October 2011 online.

If your tax code is wrong

You must tell HM Revenue & Customs (HMRC) as soon as possible so they can correct it. You may get some tax back – or you might have to pay a bit more.

HMRC will need to know your tax reference and National Insurance number. Look for these numbers on official papers to do with tax, for example:

  • a payslip
  • letters from HMRC
  • a certificate of tax paid
  • a ‘PAYE Coding Notice’ if you have one – this is a notice telling you what your tax code is

Previously Reported Tax Code Errors

Tax code errors could cost a ‘huge number of people’ over £1,000 a year, financial group warns

Don’t pay the wrong tax, check it now and get it sorted.

steve@bicknells.net