Self assessment and flipping tax codes
Discussion
Trying to do my tax return, and - as I do every year - I've hit that incredibly annoying questions about whether or not my tax coding for last year included any underpaid tax blah blah. Several things annoy me about this - first of all, it means I have to try and understand how the tax codes work, check what the "standard" code should have been for that tax year and then try to understand whether or not the final number in the tax code included any underpaid tax, and if so how much.
Secondly, my tax code seems to change several times per year (last year - the one I'm doing the tax return for - it changed in late February) so I'm never sure which one to use. The notes say it's meant to be the most recent one in the tax year, but since that was only effective for a month or so, does it make sense to use that, since I would have been paying tax based on earlier tax codes throughout the year? Then in April this year, I went back to a basic 538L code - so......??????
Thirdly - I assume that the reason I was briefly given a "K" code in Feb 08 (K461) was because I receive dividends from the company - but since I have had to pay that tax and then make payments on account, I can't understand why there would be any impact on my tax code since there shouldn't be anything "underpaid" as such.....
Can anyone make sense of this? I've noticed that if I put the K code into my tax return software it adds £4,610 to the tax I have to pay so I don't want to do it lightly!
Secondly, my tax code seems to change several times per year (last year - the one I'm doing the tax return for - it changed in late February) so I'm never sure which one to use. The notes say it's meant to be the most recent one in the tax year, but since that was only effective for a month or so, does it make sense to use that, since I would have been paying tax based on earlier tax codes throughout the year? Then in April this year, I went back to a basic 538L code - so......??????
Thirdly - I assume that the reason I was briefly given a "K" code in Feb 08 (K461) was because I receive dividends from the company - but since I have had to pay that tax and then make payments on account, I can't understand why there would be any impact on my tax code since there shouldn't be anything "underpaid" as such.....
Can anyone make sense of this? I've noticed that if I put the K code into my tax return software it adds £4,610 to the tax I have to pay so I don't want to do it lightly!
A K Code means that they have deducted so much from your Tax Allowances that the allowances have gone "negative".
The usual culprit is a large adjustment for a Benefit in Kind - usually a high end taxable Benefit in Kind such as a company car or business supplied residence.
The Revenue should not try and collect any Self Assessment tax amounts due by adjusting your tax code UNLESS you instruct them to on your tax return submission.
The usual culprit is a large adjustment for a Benefit in Kind - usually a high end taxable Benefit in Kind such as a company car or business supplied residence.
The Revenue should not try and collect any Self Assessment tax amounts due by adjusting your tax code UNLESS you instruct them to on your tax return submission.
On preparing your 2008 Tax Return, I would recommend that you ignore all of the PAYE coding notices issued for 2007/8 APART from the one that matches the final code as shown on your P60. As long as you have a breakdown of this figure then you should be able to establish what (if any) tax was coded in 2007/8 relating to earlier years as well as any other information pertinent to your Tax Return.
Hats off by the way for having a go at it your-self!!
At least you have software to assist - I remember a programme (panorama or similar) one or two years ago who gave 5 Oxford and Cambridge post-graduate maths whizz-kids a fairly simple scenario and asked them to work through HMRC's manual tax calculation work book and none of them got it right and all five had different answers. So much for self-assessment!!
Hats off by the way for having a go at it your-self!!
At least you have software to assist - I remember a programme (panorama or similar) one or two years ago who gave 5 Oxford and Cambridge post-graduate maths whizz-kids a fairly simple scenario and asked them to work through HMRC's manual tax calculation work book and none of them got it right and all five had different answers. So much for self-assessment!!
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