K code

[daisy234]

Hi,

Recently my husband had been informed that he owed tax on medical expenses covering the tax years 2012/13, 2013/14 and 2014/15 and tax due on a small amount of savings interest for these three tax periods. His tax code had been adjusted to 975L for 2014/15 to recover the amount owed/due and it has been applied as expected for the tax periods of 1 and 2.

Today we received another PAYE coding notice saying he had been moved to tax code k7 and that his personal allowance was £0. And that they estimate we owe them £764 for tax periods 1and 2.

As his income for the past three years has not exceeded £80,000 including overtime, then I'm at a loss as to understand why his income has been projected to be over £120,000. And according to the letter they wont be checking this until April 2015.

My question is how difficult is it to correct the tax code? And how do we go about it. Any tips to sort it quickly and efficiently would be useful, as the last time we had problems with HMRC, it cost us a fortune in phone calls for something that was not our fault, I'm loathed to have to pay for expensive phones calls for what seems like some sort of administrative error and be paying more tax than we should.

Thanks.

Daisy.

[AvocadoK]

The tax code of 975 is only very slightly less than a 'full' code of 1000, so it seems unlikely that it could take account of a medical benefit for 2014/15 and the tax on the benefit and interest for the two previous years. You haven't given us the figures, but I suspect that the K7 code has been worked out to collect all this. Have they actually said that they have reduced the personal allowance to nil because income is expected to exceed £120K or did you infer that? If you have a read of the notes on the back of the coding notice, you should find that it explains how they got to the number. The notes are customised, believe it or not.

You can always write to HMRC if you don't want to waste time and money on the phone. Tell them the expected value of benefits and amount of gross pay.

[Lambs]

D,

HMRC currently operates a low-cost number

0300 200 3300

which may in fact be free from your mobile or landline, depending on terms (much more favourable than the previous 0345 numbers which were quite expensive from mobiles, I think).

Your post suggests an additional liability of c£800 for the first two years in total. But the change in tax code will account for c£4,000 in additional tax, as it wipes out about £10,000 of tax-free Personal Allowances from someone who is by implication a Higher-Rate taxpayer.

Does this seem right? (It doesn't to me). It may be one of these "known issues" as set out in an earlier TW article:

http://www.taxationweb.co.uk/tax-articl ... -hmrc.html

I should check the additional comments on your P2 as per A's suggestion and, if still unsure it is correct, query with HMRC. The line is open from 08:00 - 20:00 during the week, and on Saturdays, so choose early or late to avoid most of the queues.

Regards,

Lambs



Do you know why HMRC has missed the benefit from earlier years?