As a former tax officer (>50 years ago!) I understood it - Major reduction in a tax code late in the tax year results in an accumulated heavy tax deduction in the week/month it is applied. "Week 1/Month 1" basis was introduced to avoid that hardship to a taxpayer - from the time of change he/she is paying the correct tax, the accrued underpayment to that date would be assessed/adjusted the following year. Same fact/principle applies, 50 years on.
However, in my current experience, Month 1 application/usage is being taken to ridiculous lengths. Last tax year my code was reduced in February because of an assessed underpayment of £12 (actual). If applied normally, I would have paid an extra £11 on top of my "normal" monthly tax deduction of several hundred ££. But no - in their "wisdom" the tax office notified my pension provider the reduced code as "Month 1" basis, resulting in just £1 extra being collected, leaving £11 accrued underpaid tax. This year, I've just received an assessment and tax code reduction reflecting this underpayment - same scenario, tax code reduced on a Month 1 basis, even though the actual sum underpaid is paltry. Remember, the original underpayment is now from 2 years ago!
This of course will result in THIS year's tax being again underpaid by a small amount, which won't be picked up till next tax year, and away we go again. Completely avoidable if only Month 1 was used sensibly - it's common sense that someone paying hundreds a month in tax would not be inconvenienced by an additional tenner in one month.
QUESTION - What's changed? Is Week 1/Month 1 automatically applied when a tax code is reduced? Is there no "human" overview of such things?
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