Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Rhyd6,87investor,longview,Sussexlad, for Donating to support the site

Personal Allowance

Practical Issues
wickham
Lemon Slice
Posts: 377
Joined: November 6th, 2016, 8:13 am
Has thanked: 32 times
Been thanked: 10 times

Personal Allowance

#336731

Postby wickham » August 29th, 2020, 10:10 am

Every year I receive HMRC statements of my tax code. I often receive more than one and I always ignore them as I always submit a tax return and my tax is calculated then, so the tax codes are irrelevant.

This year I have received three tax code statements so far and I decided to have a close look. Personal Allowance is different in all three - £10,947, £9,340 and the latest £12,500. Note 1 says that "This is the standard amount of taxable income most people have before they start paying Income Tax. If your total income exceeds £100,000 your allowance goes down proportionally".

I've never had an income exceeding £100,000 and I note that the standard personal allowance is £12,500 so it seems they have got it right now, but why would it have been reduced in the first two statements (and in previous year's statements) if I have never had an income exceeding £100,000?

pochisoldi
Lemon Slice
Posts: 641
Joined: November 4th, 2016, 11:33 am
Has thanked: 10 times
Been thanked: 324 times

Re: Personal Allowance

#336743

Postby pochisoldi » August 29th, 2020, 11:23 am

wickham wrote:Every year I receive HMRC statements of my tax code. I often receive more than one and I always ignore them as I always submit a tax return and my tax is calculated then, so the tax codes are irrelevant.

This year I have received three tax code statements so far and I decided to have a close look. Personal Allowance is different in all three - £10,947, £9,340 and the latest £12,500. Note 1 says that "This is the standard amount of taxable income most people have before they start paying Income Tax. If your total income exceeds £100,000 your allowance goes down proportionally".

I've never had an income exceeding £100,000 and I note that the standard personal allowance is £12,500 so it seems they have got it right now, but why would it have been reduced in the first two statements (and in previous year's statements) if I have never had an income exceeding £100,000?


The form will tell you what the deduction was for - you start with the standard personal allowance, and then they make deductions or additions to arrive at the final figure.

Possible Deductions: Unpaid tax, taxable income not taxed at source (state pension, state benefits, interest not taxed at 0%, dividends not taxed at 0%, benefits in kind shown on last year's P11D)

Possible additions: Personal pension contributions, fixed annual deductible expenses (e.g. professional subscriptions)

wickham
Lemon Slice
Posts: 377
Joined: November 6th, 2016, 8:13 am
Has thanked: 32 times
Been thanked: 10 times

Re: Personal Allowance

#336833

Postby wickham » August 29th, 2020, 7:05 pm

Thanks for your reply. I have items in both categories, so it must be a coincidence that they balance exactly in the latest statement!

mutantpoodle
Lemon Slice
Posts: 421
Joined: November 7th, 2016, 4:21 pm
Has thanked: 188 times
Been thanked: 39 times

Re: Personal Allowance

#336905

Postby mutantpoodle » August 30th, 2020, 8:54 am

In my experience they (in their wisdom) reduce the personal allowance by the amount of tax you were due to have paid LAST year
so
if you had a lot of building society last year their 'superb' system assumes that you will have the same this year
hence reduced personal allowance
this is definitely the case for me and my family returns

mind boggling in current times in view race to bottom on interest rates everywhere, but they probably all in the garden WFH so dont expect changes

I have ceased submitting tax returns early in view of this and it appears to solve the problem since 'they' dont know my interest until much later in the tax year
when I obviously and correctly pay due tax

I still do the return usually in April or May but just dont submit it

modellingman
Lemon Slice
Posts: 299
Joined: November 4th, 2016, 3:46 pm
Has thanked: 53 times
Been thanked: 135 times

Re: Personal Allowance

#339197

Postby modellingman » September 9th, 2020, 11:39 am

A tax code is simply a notification to a source of income where your income from that source is subject to deduction of tax under PAYE. It enables the source to calculate amounts of tax to be deducted and to pay these to HMRC on your behalf. If you have more than one such source, you'll get a tax code for each source.

Of course, you only have one personal allowance to cover all your sources of income so to cater for this, HMRC effectively carves up your allowance between your various sources. I don't know the precise details but in my experience with income from a couple of occupational pensions it seems to be applied in a "smallest source first" order with any unused allowance being carried over to the next source.

mutantpoodle wrote:In my experience they (in their wisdom) reduce the personal allowance by the amount of tax you were due to have paid LAST year
so
if you had a lot of building society last year their 'superb' system assumes that you will have the same this year
hence reduced personal allowance
this is definitely the case for me and my family returns

mind boggling in current times in view race to bottom on interest rates everywhere, but they probably all in the garden WFH so dont expect changes


If HMRC are aware of sources of income that are not subject to PAYE they can, in some circumstances, recover the tax due on these sources by including them within a tax code. However, unlike with PAYE sources, HMRC don't know during the tax year the precise amount of income arising from a non-PAYE source, so when collecting from these sources through the PAYE system, they estimate it as being the same annual (tax year) amount as it was previously known to be. Nothing to do with WFH or anything else Covid related. They have done it this way for as long as I can recall - at least 20 years.

Any under-payment or over-payment of tax resulting from the use of such estimated can be corrected by adjusting a tax code in a future tax year.

mutantpoodle
Lemon Slice
Posts: 421
Joined: November 7th, 2016, 4:21 pm
Has thanked: 188 times
Been thanked: 39 times

Re: Personal Allowance

#339365

Postby mutantpoodle » September 10th, 2020, 8:03 am

qq
Nothing to do with WFH or anything else Covid related. They have done it this way for as long as I can recall - at least 20 years.
uq

with respect I didnt say it was due to covid or WFH

what I said was ''dont expect changes because..........''

perhaps only a small chance. but IF they were working 'normally' they would appreciate almost zero interest rates currently and allow for that in tax codes going forwards, instead of continuing the same practices used for ages
of course that would require someone senior to make a decision, doubtless following at least one 'review' and so on...

swill453
Lemon Quarter
Posts: 3994
Joined: November 4th, 2016, 6:11 pm
Has thanked: 304 times
Been thanked: 1368 times

Re: Personal Allowance

#339368

Postby swill453 » September 10th, 2020, 8:31 am

mutantpoodle wrote:but IF they were working 'normally' they would appreciate almost zero interest rates currently and allow for that in tax codes going forwards, instead of continuing the same practices used for ages
of course that would require someone senior to make a decision, doubtless following at least one 'review' and so on...

No, that's unrealistic. They can't second-guess the interest that anyone's getting. In fact ours is pretty much the same as last year as we're coming to the end of a fixed rate period.

I wouldn't want them to add more complexity to their work, I'd be happier if they concentrated on the basics.

Scott.

Gersemi
2 Lemon pips
Posts: 131
Joined: November 4th, 2016, 3:57 pm
Has thanked: 263 times
Been thanked: 44 times

Re: Personal Allowance

#339497

Postby Gersemi » September 10th, 2020, 3:54 pm

You can always send them your own estimate of interest and dividends expected for the year. I normally do this around January when I can be fairly sure what I'll receive in the year, HMRC adjust my code and so I pay pretty much the correct amount of tax in-year.

XFool
Lemon Quarter
Posts: 4936
Joined: November 8th, 2016, 7:21 pm
Been thanked: 437 times

Re: Personal Allowance

#339517

Postby XFool » September 10th, 2020, 5:17 pm

Gersemi wrote:You can always send them your own estimate of interest and dividends expected for the year. I normally do this around January when I can be fairly sure what I'll receive in the year, HMRC adjust my code and so I pay pretty much the correct amount of tax in-year.

May I ask what method you currently use to inform HMRC of your figures? There used to be an online secure form for doing this, but long since disappeared into cyberspace.

It surprises me that an annual tax return doesn't comprehensively update their figures. It mostly does, but there is one component of my coding notice - Other Unearned Income - that seems forever fixed to some past figure whatever the current details. Their advice is to supply adjusted figures via the Personal Tax Account, but this component cannot be changed online, which seems mainly to do with changes in employment.

Gersemi
2 Lemon pips
Posts: 131
Joined: November 4th, 2016, 3:57 pm
Has thanked: 263 times
Been thanked: 44 times

Re: Personal Allowance

#339551

Postby Gersemi » September 10th, 2020, 7:51 pm

XFool wrote:
Gersemi wrote:You can always send them your own estimate of interest and dividends expected for the year. I normally do this around January when I can be fairly sure what I'll receive in the year, HMRC adjust my code and so I pay pretty much the correct amount of tax in-year.

May I ask what method you currently use to inform HMRC of your figures? There used to be an online secure form for doing this, but long since disappeared into cyberspace.

It surprises me that an annual tax return doesn't comprehensively update their figures. It mostly does, but there is one component of my coding notice - Other Unearned Income - that seems forever fixed to some past figure whatever the current details. Their advice is to supply adjusted figures via the Personal Tax Account, but this component cannot be changed online, which seems mainly to do with changes in employment.


Yes, you're right, I used to use my personal account, but you can't do it like that any more (I wonder why not?). I think last time I telephoned them.

kempiejon
Lemon Quarter
Posts: 1677
Joined: November 5th, 2016, 10:30 am
Been thanked: 443 times

Re: Personal Allowance

#339707

Postby kempiejon » September 11th, 2020, 3:38 pm

XFool wrote:May I ask what method you currently use to inform HMRC of your figures? There used to be an online secure form for doing this, but long since disappeared into cyberspace.

It surprises me that an annual tax return doesn't comprehensively update their figures. It mostly does, but there is one component of my coding notice - Other Unearned Income - that seems forever fixed to some past figure whatever the current details. Their advice is to supply adjusted figures via the Personal Tax Account, but this component cannot be changed online, which seems mainly to do with changes in employment.


I have used a webchat to tell HMRC of my dividend income above the personal allowance and query my tax code. I think it was along wait to get through but easier on the laptop than the telephone. Here's the link I think I used. https://www.tax.service.gov.uk/ask-hmrc ... -employees

XFool
Lemon Quarter
Posts: 4936
Joined: November 8th, 2016, 7:21 pm
Been thanked: 437 times

Re: Personal Allowance

#339708

Postby XFool » September 11th, 2020, 3:43 pm

kempiejon wrote:I have used a webchat to tell HMRC of my dividend income above the personal allowance and query my tax code. I think it was along wait to get through but easier on the laptop than the telephone. Here's the link I think I used. https://www.tax.service.gov.uk/ask-hmrc ... -employees

Thanks for that, kempiejon. I may give it a try when it's available.

GPhelan
Posts: 32
Joined: November 11th, 2016, 7:25 pm
Has thanked: 1 time
Been thanked: 10 times

Re: Personal Allowance

#339912

Postby GPhelan » September 12th, 2020, 4:22 pm

I am no expert, but it appears that the Personal Tax Account' is tailored to some degree, so what I see may not be visible to you. I do see some options to change some data, although they amount to a structured form that is sent for review and action later rather than direct update. I just logged on now to HMRC and ran through some of the options. It might help for you to know I am retired with Private Pension, Savings and Investment income.

Logon using Gateway
See the Personal Account Home screen
Top left is Income section with three items
Pay As You Earn - Self Assessment - National Insurance

Click on Pay As You Earn
An Overview screen appears
Click on 'Check current tax year'

This shows the PAYE Income tax summary for 6 April 2020 to 5 April 2021

The details may vary for you, but on the left I have sections for
'Your Current Private pensions'
and
'Your Income from other sources'

Under this latter item are two options
'State Pension' showing a value with an 'update or remove' link
'Non Coded Income' showing a value with an 'update or remove' link

Click on the 'Update or remove' link under 'Non Coded Income'

This now displays a page headed Tell us about other income
Click on the Green 'Start Now' button

You are now asked if this is for the Current or Next tax year
Click on Current

You are now asked to provide a lot of the contact details they should already have, after which you get a new web page headed:
'What do you want to tell us?'

This provides Three options:
Do you have other income which is incorrect?
Do you have other income that is missing?
Do you have other income that has ended?
each with a Yes/No button

I selected 'Other income incorrect'
This listed about 12 income sources, each of which one could select and enter a value into a box headed 'correct amount'.
Some of the sources were obscure and clicking the 'Help for this page' resulted in a 'not found' message.
I have not explored the options for changing missing or ended income.

There is another path along which data can be changed

Back to the PAYE Income tax summary page
On the right hand side under the heading 'Annual amounts' is 'Your tax free amount'
Under this is a clickable link 'What makes up your tax free amount'

This displays a page showing how the tax code is computed from different elements.
For me this includes a line for 'Gift Aid Payments' which has an 'Update or Remove' option beside it. I used this facility 2 years ago, when the value used in calculating my tax code was much lower than that submitted in my previous tax return.

Below this section are more clickable options to add a missing allowance or tax relief, a missing company benefit or add missing income from another source.


Return to “Taxes”

Who is online

Users browsing this forum: No registered users and 4 guests