A real-life scenario:
An employee earns £3,125 per month – £37,500 p.a. However, in April she had a bonus of £7,300 – making her gross pay for the month £10,425. Her tax code in April was 1216L – a reduction from the expected 1257L due to benefits in kind. However, in late May, just before the payroll was to be run, a new coding was received – K221X. HMRC systems had seen £10,425 pay in April and then assumed that her annual earnings would be 12 times that figure – £125,100. So, the code was amended to withdraw the personal allowance, resulting in a significant amount of tax being due in May!
The employee was able to go online into her personal tax account and provide a revised estimate of income for the year, and a new coding is awaited! This does mean though that a significantly extra amount of tax was being deducted in May.
If your tax code has changed significantly, and you do not know why, please contact us, and supply the full details of the HMRC calculation of the code so that we can advise further.
Please also ensure you have access to your personal tax account with HMRC. Ask for our help if you want any assistance is setting one up. Find out more from the UK website.
Call us now and we can highlight your options to minimise the tax position.
