Using an Umbrella? CHECK YOUR TAX CODE!!

[cojak]

If you are moving from outside to inside IR35 and you are going to use an Umbrella, tell them of your current tax code in writing and make sure that that you check your Tax Code as soon as possible!!.

Generally, when people move from one employer to another, their P45 or P60 goes with them and the tax code is on there. Your circumstances may mean that you didn’t hand your P45 or P60 to the Umbrella when you switched from your Ltd.

If this is the case, unless you tell them, the Umbrella will place you on the Emergency tax code at 20% - YOU WILL HAVE TO PAY THE DIFFERENCE IN THE FUTURE.

Ultimately it is your responsibility to get it right, so contact your Umbrella AND HMRC ASAP, then this may only be 1 months back tax that you owe.

See here for more information https://www.gov.uk/tax-codes/tell-hm...hange-tax-code

[eek]

If you are moving from from outside to inside IR35 and you are going to use an Umbrella, tell them of your current tax code in writing and make sure that that you check your Tax Code as soon as possible!!.

Generally, when people move from one employer to another, their P45 or P60 goes with them and the tax code is on there. Your circumstances may mean that you didn’t hand your P45 or P60 to the Umbrella when you switched from your Ltd.

If this is the case, unless you tell them, the Umbrella will place you on the Emergency tax code at 20% - YOU WILL HAVE TO PAY THE DIFFERENCE IN THE FUTURE.

Ultimately it is your responsibility to get it right, so contact your Umbrella AND HMRC ASAP, then this may only be 1 months back tax that you owe.

or even a single month (month 2 / 3) with slightly less money as things are corrected.

[lucyclarityumbrella]

No umbrella company should process any payments without a P45 or a signed starter checklist

[cojak]

No umbrella company should process any payments without a P45 or a signed starter checklist

Which includes notification of the tax code I guess?

[lucyclarityumbrella]

Which includes notification of the tax code I guess?

Absolutely from the P45, dependent on which statement is ticked on the starter checklist, dictates what tax code to use to submit the first payment, after that we would normally expect to see a coding notice change from HMRC to amend if needs be.

[WTFH]

Absolutely from the P45, dependent on which statement is ticked on the starter checklist, dictates what tax code to use to submit the first payment, after that we would normally expect to see a coding notice change from HMRC to amend if needs be.

Will that coding notice change only be generated if HMRC are made aware that the circumstances have changed/the current one is incorrect?

If not, how else would they know to send a change?

[ladymuck]

Will that coding notice change only be generated if HMRC are made aware that the circumstances have changed/the current one is incorrect?

If not, how else would they know to send a change?

I think that's where the "if needs be" aspect of Lucy's post comes from...

HMRC won't change a code if no-one tells them of a change in circumstances.

[lucyclarityumbrella]

Will that coding notice change only be generated if HMRC are made aware that the circumstances have changed/the current one is incorrect?

If not, how else would they know to send a change?

I believe it would only be issued, if HMRC can see two incomes, if it is another PAYE income then this should be spotted by HMRC when it is reported and hence will kick out a notice. If it is another income and HMRC are not notified until the end of the tax year then nothing an umbrella can do. The individual would have to notify HMRC to see if an adjustment was required.

[eek]

Adding this now I've found it

The following are emergency tax codes

• 1257 W1 (weekly pay)
• 1257 M1 (monthly pay)
• 1257 X (emergency we've lost the previous figures so don't have a starting figure to work from)

The following codes are overrides because you have another job that results in you being paid at this level

BR	All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)
D0	All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension)
D1	All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension)

SBR	All your income from this job or pension is taxed at the basic rate in Scotland (usually used if you’ve got more than one job or pension)
SD0	All your income from this job or pension is taxed at the intermediate rate in Scotland (usually used if you’ve got more than one job or pension)
SD1	All your income from this job or pension is taxed at the higher rate in Scotland (usually used if you’ve got more than one job or pension)
SD2	All your income from this job or pension is taxed at the top rate in Scotland (usually used if you’ve got more than one job or pension)

CBR	All your income from this job or pension is taxed at the basic rate in Wales (usually used if you’ve got more than one job or pension)
CD0	All your income from this job or pension is taxed at the higher rate in Wales (usually used if you’ve got more than one job or pension)
CD1	All your income from this job or pension is taxed at the additional rate in Wales (usually used if you’ve got more than one job or pension)

And these codes do exactly what they say on the tin - they don't give you any starting allowance and tax all income at 20%, 40% or 45% regardless of the fact you may go into the next band.

If your payslip contains one of these codes be very careful over what you are being paid especially if you are on a BR or 0 code.

[lucyclarityumbrella]

And if you don't check it - there is always a possibility of ending up with a tax bill at the end of the year!