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So, HMRC tax code advice duff?

Concerning a reply given to my colleague about his tax code.

A colleague asked me to look at his tax code. He owes about £500 in tax, so it has been reduced by 250 - being 5 x the amount.

However, as he is a higher rate tax payer I explained that this would mean that in fact pay roughly double.

He phoned HMRC who said (paraphrasing) that the tax code change only affected the 20% band, and the 40% band kicked in at a fixed monetary amount so the tax collected would be fine.

Have I really got myself in a pickle, are they right? (I don't think so.. but am happy to be corrected)

My payroll software works in bands of income.

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27th Mar 2019 09:18

You're right, of course. Assuming he's more than £2500 into the higher rate band, a tax code reduction of 250 points is going to result in extra tax of £1000 (40% of £2500).

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27th Mar 2019 09:19

No I think you are correct.

Whilst 40% kicks in at an annual band PAYE works on monthly slices of that, so by the end of the year an adjustment of £2,500 will have collected £1,000 from a 40% taxpayer

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27th Mar 2019 09:39

Utter garbage, Tom.

HMRC staff are so poorly trained. Get him to ring back and ask to speak to someone who knows what they're talking about.

Could be a long wait, though. There's only one in the office.

Thanks (2)
to lionofludesch
27th Mar 2019 10:17

"There's only one in the office"

What if he/she is on leave or, even worse, long term sick?

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to Chris.Mann
27th Mar 2019 10:25

Bad luck.

You pay too much tax until he's back in work.

But don't worry - all this nonsense will disappear with RTI.

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to lionofludesch
27th Mar 2019 10:31

RTI - brilliant system, just like MTD will be!

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27th Mar 2019 10:16

The 40% rate does kick in at a fixed monetary amount, it's when your taxable income uses up the basic rate band. The personal allowance is obviously deducted before then though and reducing it doesn't make the BRB bigger.

Absolute rubbish, I would suggest giving him some pointers on exactly what to say and getting another call made.

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By tom123
27th Mar 2019 11:37

Thanks - thought I was going mad..

Best not shred my certificates yet then,

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By tom123
27th Mar 2019 11:37

So glad I don't have to deal with this daily like most people on here!

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30th Mar 2019 12:09

I think you are right. It looks their estimate of his income is not correct and has not identified he's a higher rate taxpayer. The adjustment would be correct if it was operating for only half the tax year. I've just looked at a couple of codes for h/r taxpayers where there are tax arrears and the coding adjustment is less.

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