Discussion
Has anyone out there got a good knowledge of tax codes?
I ask because I've just been put onto a K tax code and now my tax free amount is now negative! After being in the forces for years i don't understand tax codes and how they are relevant, it's like black magic to a thick ex-matelot like me.
Please can someone enlighten me.
Thanks.
I ask because I've just been put onto a K tax code and now my tax free amount is now negative! After being in the forces for years i don't understand tax codes and how they are relevant, it's like black magic to a thick ex-matelot like me.
Please can someone enlighten me.
Thanks.
Look at your code, stick a zero on the end, and that's the amount you can earn before paying tax. If it's a K code, then add the zero that's the extra amount they tax you on over and above paying tax on your full salary.
You shouldn't have a K code unless your benefits in kind exceed your tax free allowance, or you've underpaid tax before and they are clawing it back.
You shouldn't have a K code unless your benefits in kind exceed your tax free allowance, or you've underpaid tax before and they are clawing it back.
Ok folks thanks for the information, i understand that to a certain extent.
Some background: I left the forces last year and started getting a military pension. I had 12 months or so off and now i'm 3 months into a new job, salary, car allowance + fuel card. So yes HMRC will be looking at it all. Alarm bells rung when i got a statement about my monthly pension which now has a sizeable chunk taken out as income tax. The amount doesn't relate to being a 40% or 20% taxpayer.
Also had a letter from HMRC about how we work out your tax code. It has amounts about job expenses and 'less adjustment to rate bands' none of which make any sense or relate to the salary i'm getting or car allowance amounts. The letter says i owe the £369, fair enough but will i continue to be on a K code until that amount is recovered or until the next tax year and in the meantime have the sizeable chunk taken out of my pension??
I will of course call out friendly HMRC but in the past the left me total confused when i 'owed' them regarding a mileage expenses form. I digress here but two different advisers told me, and i quote, 'Just re-submit the paperwork Sir and change the figures if you get what i mean, then we can make this go away' Eh, really!!
So i hope you can appreciate i'm reluctant to call them until I've got a grip of whats going on.
Therefore all info i can gather is muchly appreciated.
Double six: Unfortunately mate i 'aint earning over £122000, not even close.
Sorry it a bit long winded.
Thanks.
Some background: I left the forces last year and started getting a military pension. I had 12 months or so off and now i'm 3 months into a new job, salary, car allowance + fuel card. So yes HMRC will be looking at it all. Alarm bells rung when i got a statement about my monthly pension which now has a sizeable chunk taken out as income tax. The amount doesn't relate to being a 40% or 20% taxpayer.
Also had a letter from HMRC about how we work out your tax code. It has amounts about job expenses and 'less adjustment to rate bands' none of which make any sense or relate to the salary i'm getting or car allowance amounts. The letter says i owe the £369, fair enough but will i continue to be on a K code until that amount is recovered or until the next tax year and in the meantime have the sizeable chunk taken out of my pension??
I will of course call out friendly HMRC but in the past the left me total confused when i 'owed' them regarding a mileage expenses form. I digress here but two different advisers told me, and i quote, 'Just re-submit the paperwork Sir and change the figures if you get what i mean, then we can make this go away' Eh, really!!
So i hope you can appreciate i'm reluctant to call them until I've got a grip of whats going on.
Therefore all info i can gather is muchly appreciated.
Double six: Unfortunately mate i 'aint earning over £122000, not even close.
Sorry it a bit long winded.
Thanks.
Fuel card may not be worth it - private fuel is taxed so highly it is getting hard to see why anyone would have it (apart from the admin burden of recording business v private miles). The scale charge is now £22.2k so some people would pay more tax on the fuel than the car which is bonkers. I suspect many businesses don't realise how much this is costing people - almost never worth it for someone with their own company and now at the point where the tax on it can exceed the actual benefit from private miles.
For example lets says the percentage based on co2 for your car is 25% - apply to fuel scale figure of £22.2k and you get £5,550 scale benefit for fuel. If you are 40% tax payer that means tax of £2,220 - at 40mpg / £5 per gallon that ,sans you need to do 17,760 private miles to break even just on the tax (8,830 for 20% taxpayer). And next year's % rises to 27% making it worse.
For example lets says the percentage based on co2 for your car is 25% - apply to fuel scale figure of £22.2k and you get £5,550 scale benefit for fuel. If you are 40% tax payer that means tax of £2,220 - at 40mpg / £5 per gallon that ,sans you need to do 17,760 private miles to break even just on the tax (8,830 for 20% taxpayer). And next year's % rises to 27% making it worse.
oop north said:
Fuel card may not be worth it - private fuel is taxed so highly it is getting hard to see why anyone would have it (apart from the admin burden of recording business v private miles). The scale charge is now £22.2k so some people would pay more tax on the fuel than the car which is bonkers. I suspect many businesses don't realise how much this is costing people - almost never worth it for someone with their own company and now at the point where the tax on it can exceed the actual benefit from private miles.
For example lets says the percentage based on co2 for your car is 25% - apply to fuel scale figure of £22.2k and you get £5,550 scale benefit for fuel. If you are 40% tax payer that means tax of £2,220 - at 40mpg / £5 per gallon that ,sans you need to do 17,760 private miles to break even just on the tax (8,830 for 20% taxpayer). And next year's % rises to 27% making it worse.
Don't get me started. Of course you're right, but try telling that to even quite senior people with degrees and professional qualifications and everything. All they say is "but I'll have to pay for my own fuel, whereas it's free at the moment."For example lets says the percentage based on co2 for your car is 25% - apply to fuel scale figure of £22.2k and you get £5,550 scale benefit for fuel. If you are 40% tax payer that means tax of £2,220 - at 40mpg / £5 per gallon that ,sans you need to do 17,760 private miles to break even just on the tax (8,830 for 20% taxpayer). And next year's % rises to 27% making it worse.
They just don't get it. You've got a better chance of someone allowing you to shag their partner than you have of them letting you take their fuel card off them.
Muffler, I'm ex Navy as well and have a pension income from service. Eric nailed it I think.
It doesn't take much of a civvy job at all to push you into the higher tax bracket and when you put fuel cards and company cars into the mix, it can be quite a clobbering.
Up to you to decide if it's worth it. I now employ ex forces guys on pensions and all of them don't take the fuel card or the company car, they take the car allowance instead. It's still taxable at 40% but seems to work out cheaper than taking the Audi!
It doesn't take much of a civvy job at all to push you into the higher tax bracket and when you put fuel cards and company cars into the mix, it can be quite a clobbering.
Up to you to decide if it's worth it. I now employ ex forces guys on pensions and all of them don't take the fuel card or the company car, they take the car allowance instead. It's still taxable at 40% but seems to work out cheaper than taking the Audi!
Hainey said:
Muffler, I'm ex Navy as well and have a pension income from service. Eric nailed it I think.
It doesn't take much of a civvy job at all to push you into the higher tax bracket and when you put fuel cards and company cars into the mix, it can be quite a clobbering.
Up to you to decide if it's worth it. I now employ ex forces guys on pensions and all of them don't take the fuel card or the company car, they take the car allowance instead. It's still taxable at 40% but seems to work out cheaper than taking the Audi!
Hi Mate, thanks for the reply. Yes i think you're right about Eric's comment. It doesn't take much of a civvy job at all to push you into the higher tax bracket and when you put fuel cards and company cars into the mix, it can be quite a clobbering.
Up to you to decide if it's worth it. I now employ ex forces guys on pensions and all of them don't take the fuel card or the company car, they take the car allowance instead. It's still taxable at 40% but seems to work out cheaper than taking the Audi!
I take the company car allowance and the fuel card. What would be the alternative to not having a fuel card? If i paid for the fuel myself it would cost me a fortune! It is difficult to understand it all especially after being PAYE for so long, i hope that the bite that the taxman just took out of my pension will not be a monthly occurrence.
Cheers.
Muffster said:
Hi Mate, thanks for the reply. Yes i think you're right about Eric's comment.
I take the company car allowance and the fuel card. What would be the alternative to not having a fuel card? If i paid for the fuel myself it would cost me a fortune! It is difficult to understand it all especially after being PAYE for so long, i hope that the bite that the taxman just took out of my pension will not be a monthly occurrence.
Cheers.
It will be if it's correct.I take the company car allowance and the fuel card. What would be the alternative to not having a fuel card? If i paid for the fuel myself it would cost me a fortune! It is difficult to understand it all especially after being PAYE for so long, i hope that the bite that the taxman just took out of my pension will not be a monthly occurrence.
Cheers.
Muffster said:
Hainey said:
Muffler, I'm ex Navy as well and have a pension income from service. Eric nailed it I think.
It doesn't take much of a civvy job at all to push you into the higher tax bracket and when you put fuel cards and company cars into the mix, it can be quite a clobbering.
Up to you to decide if it's worth it. I now employ ex forces guys on pensions and all of them don't take the fuel card or the company car, they take the car allowance instead. It's still taxable at 40% but seems to work out cheaper than taking the Audi!
Hi Mate, thanks for the reply. Yes i think you're right about Eric's comment. It doesn't take much of a civvy job at all to push you into the higher tax bracket and when you put fuel cards and company cars into the mix, it can be quite a clobbering.
Up to you to decide if it's worth it. I now employ ex forces guys on pensions and all of them don't take the fuel card or the company car, they take the car allowance instead. It's still taxable at 40% but seems to work out cheaper than taking the Audi!
I take the company car allowance and the fuel card. What would be the alternative to not having a fuel card? If i paid for the fuel myself it would cost me a fortune! It is difficult to understand it all especially after being PAYE for so long, i hope that the bite that the taxman just took out of my pension will not be a monthly occurrence.
Cheers.
If your employer isn't willing to pay that then you can claim the difference in what they do pay compared to those figures on your tax.
I think your in the situation one of my guys was in when he came to us from his first job after the forces. With pension and basic with his last lot he was on a total of 40k-ish, a fuel card and an audi a3/a4 I think and said he was only taking home 2k a month.
He is on a much better deal running his own car now. You might be in the same trap.
Ok, so i'm beginning to think it's to do with having a fuel card. Although i do very little personal mileage, literally a few miles a week, it's all recorded via mileage capture.
The company has us on some scheme where we get the equivalent monetary value of a the 45p/10000 miles for running our own car paid direct to monthly salary rather than submitting a business mileage form to HMRC.
I wonder if this is where the issue is.
If so, can i get around it by giving the fuel car back, paying for the fuel myself and claiming it via through expenses?
Thanks.
The company has us on some scheme where we get the equivalent monetary value of a the 45p/10000 miles for running our own car paid direct to monthly salary rather than submitting a business mileage form to HMRC.
I wonder if this is where the issue is.
If so, can i get around it by giving the fuel car back, paying for the fuel myself and claiming it via through expenses?
Thanks.
A fuel card with car allowance is taxed differently to a company car and card (based on CO2)
So you are being credited with the cash value of the fuel card. Say you spend £8k on fuel, thats a "benefit" and reduces your tax code by same amount. This cash value goes in other benefits on tax return as "fuel"
What you should be doing is then claiming back business mile tax relief at .45p mile for the first 10K miles and then .25p for miles after
Say you do 20k business miles then you have an expense of £4500 + £2500 = £7000 and this goes in the other business expenses on your tax return
So you would pay extra tax on £8k cash and receive relief on £7k of expense means youve really paid tax on an extra £1k, so if a higher rate payer your fuel card and the perception of "free" fuel has cost you £400 for the year. Now if you have done 1000 private miles thats not so good, but if you have done 10K private miles it is.
Obviously the mpg of your car and exact figures will differ, but thats the gist of it.
If you have not been claiming tax relief on business miles, the tax man owes you money. Obviously you need to keep basic records of business mile journeys each week, so you can prove any claim should it be queried...
So you are being credited with the cash value of the fuel card. Say you spend £8k on fuel, thats a "benefit" and reduces your tax code by same amount. This cash value goes in other benefits on tax return as "fuel"
What you should be doing is then claiming back business mile tax relief at .45p mile for the first 10K miles and then .25p for miles after
Say you do 20k business miles then you have an expense of £4500 + £2500 = £7000 and this goes in the other business expenses on your tax return
So you would pay extra tax on £8k cash and receive relief on £7k of expense means youve really paid tax on an extra £1k, so if a higher rate payer your fuel card and the perception of "free" fuel has cost you £400 for the year. Now if you have done 1000 private miles thats not so good, but if you have done 10K private miles it is.
Obviously the mpg of your car and exact figures will differ, but thats the gist of it.
If you have not been claiming tax relief on business miles, the tax man owes you money. Obviously you need to keep basic records of business mile journeys each week, so you can prove any claim should it be queried...
The car allowance and fuel will be taxed in retrospect so that cant be affecting your code
As per the response earlier in the thread, to be on a K code, you could have:
1. owing tax from previous year
2. Emergency code by employer i.e. they just have not received a coding notice yet
3. Be using your 10K tax allowance on another employment or pension (could be this if you have paid tax on pension)
If you received say a lump sum pension payment and HMRC has assumed this is going to be a regular monthly amount they could have coded you based on that.
If you register online to do your tax return and get an account, you can do self assessment online, see their calculations on your tax statement and make adjustments online to it. I find it efficient, tax rebates in under a week after submission, adjustments to tax code in about a week of me notifying them of changes etc.
You dont "normally" have to do a return unless you earn over £100k or have more complex than normal tax affairs, perhaps income from property, company cars, multiple income sources that kind of thing. Perhaps worth doing.
As a minimum you should just call your local tax office and ask for the calculation of your tax code, then take it from there.
As per the response earlier in the thread, to be on a K code, you could have:
1. owing tax from previous year
2. Emergency code by employer i.e. they just have not received a coding notice yet
3. Be using your 10K tax allowance on another employment or pension (could be this if you have paid tax on pension)
If you received say a lump sum pension payment and HMRC has assumed this is going to be a regular monthly amount they could have coded you based on that.
If you register online to do your tax return and get an account, you can do self assessment online, see their calculations on your tax statement and make adjustments online to it. I find it efficient, tax rebates in under a week after submission, adjustments to tax code in about a week of me notifying them of changes etc.
You dont "normally" have to do a return unless you earn over £100k or have more complex than normal tax affairs, perhaps income from property, company cars, multiple income sources that kind of thing. Perhaps worth doing.
As a minimum you should just call your local tax office and ask for the calculation of your tax code, then take it from there.
Yes i will definitely call the tax office, i wanted to try and educate myself a bit more before i do so.
Will also speak to the pension provider and payroll back in the office.
I use an accountant to do my return and will speak to him as well but of course there will be a charge for him to look at it so again i want to know what i'm talking about.
Thanks again.
Will also speak to the pension provider and payroll back in the office.
I use an accountant to do my return and will speak to him as well but of course there will be a charge for him to look at it so again i want to know what i'm talking about.
Thanks again.
Very true mate.
Had a call from my friendly HR dept today. Apparently from today i'm now on a DO code which is 'worse' Great!
So, called HMRC and they were very helpful and i shouldn't be on either a K or DO code. (so why do they do it?!) Although i still don't fully understand how my car/mileage/fuel car effects my salary & tax.
They had come to the conclusion that my allowances were in the negative so i owed the tax man before i get out of bed. It seems that HMRC do a lot of estimating and guess work when working out how much they might tax you. Useful!
Anyway, i appreciate the comments above.
Thanks.
Had a call from my friendly HR dept today. Apparently from today i'm now on a DO code which is 'worse' Great!
So, called HMRC and they were very helpful and i shouldn't be on either a K or DO code. (so why do they do it?!) Although i still don't fully understand how my car/mileage/fuel car effects my salary & tax.
They had come to the conclusion that my allowances were in the negative so i owed the tax man before i get out of bed. It seems that HMRC do a lot of estimating and guess work when working out how much they might tax you. Useful!
Anyway, i appreciate the comments above.
Thanks.
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