Grr...Reduced Tax Code Notification. Help!

[contractgeeza1]

Dear Louisa@InTouch,

I think you're right about the fact that the HMRC thinks I will earn total income over £100k this tax year. The notice on the letter states -

This is how we worked out your tax code:

Your PA - £10600 (See note 1)
Savings income taxable at higher rate - -£10000 (See note 2)
A tax free amount of - £600 (See note 3)

Note 2:

We will check if there is anything that would reduce your tax free amount. Savings Income or company dividends - Is usually taxed before it is paid to you (tax @ 20% on interest and 10% on dividends) As you will be paying some of your tax at 40%, extra tax will be due on your savings income, so we have included an adjustment to collect extra tax due.

This tax year I plan to have a total income of £42384 due to anticipated lower company profits, this means I should be entitled to my 1060L Tax code. Is this what I need to tell the HMRC?


@JB3000 - I have been bothered to read the notice, but didnt understand the reason, hence the post on this forum....My accountant and HMRC will be unreachable until tuesday next week, therefore I have sought out advice from you guys this weekend

[JB3000]

Hi,

Ive been a silent reader on these forums for a while and have learnt a lot over the past year since creating a LTD company (So thanks for the valuable knowledge)

Im a bit stuck and before I ask my accountant or talk to the HMRC, I thought id get some advice from you guys first.

I got a letter from the HMRC stating that they are going to reduce my Tax code from 1060L to 60L (£600 PA) for the 2015-16 tax year after they reviewed my SATR for 2014-15.

In my SATR for 2014-15, it was indicated that I had a salary of £9999.99 and a Gross Dividend income of £90000, my total income was therefore £99,999.99. This is ALL the income I had last year, no other sources.

Any idea why they would go ahead and reduce my tax code??? Any help would be greatly appreciated.

Many Thanks,

Atif

Why don't you just read the notice? The notice will say why the code had been reduced!!!

Or if you can't be bothered to read the notice, just call HMRC or ask your accountant to call them?

[Louisa@InTouch]

Hi Atif,

Usual reasons for reductions in tax code, would be;

- Underpaid taxes from prior years
- Assumption of income in excess of £100K, so reduction in personal allowance
- Large benefit in kind or income sources with no tax deductions.

From your situation, if you have not underpaid or asked for prior years taxes to be deducted from 15-16, it is likely HMRC think your total gross income will exceed £100K so have reduced your code accordingly.

However if you have had a tax code change letter, it will state under the change either at the bottom of page 1 or on page 2 reasons for the change.

Hope this helps, if not, your accountant will be able to phone them and find out why. Then if HMRC haveqde incorrect assumptions change this for you

[contractgeeza1]

Nop - I owe them roughly 20k in tax, which is to be paid by 31st Jan 2017. I was going to pay them by the end of this month as I have the money set aside.

Are you saying they reduced my tax code because they think my LTD company is going to reclaim the tax back via PAYE?

Regards,

Atif

[FarmerPalmer]

Because when you filled in your self assessment tax return, you asked for them to reclaim underpaid tax (the 20% to 40% bit) from the last year on your tax code, rather than send them a cheque ?

[contractgeeza1]

Hi,

Ive been a silent reader on these forums for a while and have learnt a lot over the past year since creating a LTD company (So thanks for the valuable knowledge)

Im a bit stuck and before I ask my accountant or talk to the HMRC, I thought id get some advice from you guys first.

I got a letter from the HMRC stating that they are going to reduce my Tax code from 1060L to 60L (£600 PA) for the 2015-16 tax year after they reviewed my SATR for 2014-15.

In my SATR for 2014-15, it was indicated that I had a salary of £9999.99 and a Gross Dividend income of £90000, my total income was therefore £99,999.99. This is ALL the income I had last year, no other sources.

Any idea why they would go ahead and reduce my tax code??? Any help would be greatly appreciated.

Many Thanks,

Atif