Tax Code for person earning £280,000 per annum

What would the typical tax code be for a person earning £280,000pa

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I have a client to earns £280,000 per annum that is all processed through payroll. Year 2022/2023.  This is sole income no other employment or dividends etc.  Income this year will be around £200,000.

I processed 2023 2024 with the 1257L tax code and HMRC have told me this doen't apply. But I am yet to receive further coding from them.

What would the typical TAX CODE be for this level of earnings?  I am not going to process until I hear from them but would like to know what the standard code would be please.

Thank you.

 

 

Replies (15)

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By Paul Crowley
20th May 2024 14:52

Properly coded by HMRC there would be no personal allowance, if that has been his rate of pay for years.
Use the coding from the P45 until you get a coding from HMRC
No P45?
Just follow the instructions on the starter form.

How did HMRC get involved?
Is this a continuous employment? If so then the code does not change between years unless notified.

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By Not Anonymous
20th May 2024 15:18

0T.

But any extra tax code allowances, for example professional subscriptions, or deduction like company benefits would change that.

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By Not Anonymous
20th May 2024 15:20

Duplicate

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Danny Kent
By Viciuno
20th May 2024 15:31

Was all of 2023/24 processed with a S1257 tax code?

You are also asking about 2022/23 - does that mean the same tax code was used for both tax years? And presumably this year as well?

As above posters have said, I'd expect 0T.

If they really do have no other sources of income, presume they have not been correcting the coding notice error by filing a SATRs? If so will have additional tax to pay for those tax years.

As an aside, always baffles me how some folk earning 6 figures have 0 interest or dividends.

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Replying to Viciuno:
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By FactChecker
20th May 2024 15:41

How did you glean that client is a Scottish resident? :=)

But, I agree with "always baffles me how some folk earning 6 figures have 0 interest or dividends".
"No other employment or dividends etc." ... not even any BiKs or over/under-paid tax from previous years, or ...

I'm also curious as to what Payroll software was used? In particular how it handled both the normal PAYE rules regarding removal of PA (due to high earnings) with the PA being set by the tax code (I'd have expected software complaints)?

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Replying to FactChecker:
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By Not Anonymous
20th May 2024 18:27

FactChecker wrote:

How did you glean that client is a Scottish resident? :=)

But, I agree with "always baffles me how some folk earning 6 figures have 0 interest or dividends".
"No other employment or dividends etc." ... not even any BiKs or over/under-paid tax from previous years, or ...

I'm also curious as to what Payroll software was used? In particular how it handled both the normal PAYE rules regarding removal of PA (due to high earnings) with the PA being set by the tax code (I'd have expected software complaints)?

Your final paragraph has confused me. My understanding, which could easily be wrong, is that payroll software is designed to calculate the appropriate tax deductions based on the taxable income each pay period and the tax code (including the basis of operation) the employer is using.

It isn't designed to check if that tax code is correct or not.

What are you expecting the software to do Inthis situation? Flag up a message to the payroll operator?

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Replying to Not Anonymous:
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By FactChecker
20th May 2024 19:30

Basically, yes (and sorry for the unclear wording).

There are loads of things that good Payroll software should do (beyond just accept or reject data and process for net pay/payslip/RTI/etc) ... and producing some sort of 'exceptions report' would be at the top of my list.
It doesn't stop/interfere with processing, but gives the operator a few things to check in case (unusually) something may need to be changed/re-run ... and I'd have thought this scenario would be a prime contender for a 'warning' note.

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Replying to Viciuno:
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By NotAnAccountant2
20th May 2024 15:59

Viciuno wrote:

As an aside, always baffles me how some folk earning 6 figures have 0 interest or dividends.

60K pension, 80K (couple) ISAs p.a. Even at 280K p.a. that doesn't leave a huge amount of after tax money to be earning (taxable) interest or dividends once the mortgage has been paid. Plus, unless both are earning >100K it makes sense for the lower earner to hold any money in interest generating accounts and once the interest is small it actually starts making sense to seek out a current account where it's zero, even more so if it's a joint account.

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Replying to NotAnAccountant2:
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By FactChecker
20th May 2024 16:13

"80K (couple) ISAs p.a."?
Even if client has partner it's 'only' £20k p.a. per person per tax year.

And, although by definition we know nothing about this person's circumstances or life style (and I'm not passing any kind of 'judgement'), it would be unusual - in my experience - for someone with those earnings not to be salting away some of it in an easy to extract investment. But hypotheses are fruitless if interesting!

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Replying to FactChecker:
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By NotAnAccountant2
20th May 2024 16:59

FactChecker wrote:

"80K (couple) ISAs p.a."?
Even if client has partner it's 'only' £20k p.a. per person per tax year.

And, although by definition we know nothing about this person's circumstances or life style (and I'm not passing any kind of 'judgement'), it would be unusual - in my experience - for someone with those earnings not to be salting away some of it in an easy to extract investment. But hypotheses are fruitless if interesting!

Sorry, yes, you're right 40K combined.

I only ever had tiny amounts of interest and dividends, money either went to paying down mortgages[1] or was held in my wife's name, either as cash or investments. While it wasn't zero, my non-employment income was less than 0.1% of my taxable income and if I was describing it I'd have said "I have employment income only".

[1] we had a weird fixed rate mortgage that was half way to an offset mortgage if you played it right.

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Replying to Viciuno:
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By Matrix
20th May 2024 16:25

Offset mortgages?

However there may be unclaimed pension tax relief or pension tax charge.

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Replying to Viciuno:
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By petercooperuk
21st May 2024 20:32

Viciuno wrote:

As an aside, always baffles me how some folk earning 6 figures have 0 interest or dividends.

This is a huge tangent, I know, but it might become less surprising with dividends soon. At current CT and dividend rates, anyone taking more than £380,000 a year out of their company pays less total tax on salary than dividends, amazingly.

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Replying to Viciuno:
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By Mr_awol
22nd May 2024 11:15

Viciuno wrote:

As an aside, always baffles me how some folk earning 6 figures have 0 interest or dividends.

To be fair it used to amuse me too, and to an extent i agree i would expect them to have 'something' but as much as i hate to agree with Jeremy (H)unt it's fair to say that six figures (or as he put it £100k) "isnt that much these days"

Take a salary of £150k. Take home is about £7,500 per month. Nice, but once you factor in putting something away for the future (pension) and add 'a nice house, nice car, decent holiday or two per year, etc' it starts to dissolve quite quickly. Most of my clients in that position have a few kids and a spouse that either doesnt work, or who brings in a very small income from part-time work or a lifestyle self-employment (not always a male breadwinner but still currently more often than not).

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By kim.shaw-and-co.com
21st May 2024 02:45

You just wait for a P9 if you're a 64-8 Agent for the employer and until it is received, continue with the code you have been using. Based on the fact pattern outlined, 0T would apply if this is the only or main employment, but since the taxpayer has a Self Assessment filing requirement, this may also be affected by pension reliefs, charitable donations under Gift Aid etc. once a Return for 23-24 has been filed.

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By Not Anonymous
21st May 2024 07:51

And there is of course the possibility the client is fully aware their tax code is not as accurate as it could be and is playing the system to get an interest free loan from HMRC.

Having the benefit of less tax deducted during the year and a larger than strictly necessary Self Assessment bill to pay roughly 9 months after the tax year has ended.

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