The new tax 12 months is effectively underway and with the earlier 12 months having wrapped up in April, HMRC is still catching up with what you owe and what you’re owed from your end-of-year calculations.
Tax calculations based mostly on your earnings, financial savings, pension and other advantages imply that taxpayers should verify their payslips and finish of 12 months P60 rigorously, because HMRC could change your tax code to acquire any unpaid tax you owe, particularly after banks report financial savings curiosity and online marketplaces report earnings instantly to HMRC.
Your tax code, normally discovered on the high of your payslip, determines how much tax you pay and how much tax-free personal allowance you’re given. A normal code is 1257L, which means you’ll get £12,570 tax-free personal allowance before you start paying tax on every £1 you earn above £12,570. The L means you’re entitled to the customary tax-free personal allowance.
But there are other codes, such as BR, which is an emergency tax code – normally issued when you begin a new job or second job and the tax owed hasn’t been totally labored out yet – and N, which means you’ve transferred some tax allowance to your partner.
Tax consultants at the Low Incomes Tax Reform Group (LITRG) say the tax code Ok could imply you owe tax money to HMRC, which has led the taxman to slash your personal allowance down to pay for it.
They said: “K codes are a type of tax code that will result in more tax being collected out of your wages, via the PAYE system.
“If your tax code has recently changed to a K code – or you have noticed any other change to your code that has resulted in a significant decrease to your take home pay – it may be that HMRC are trying to collect debts, like tax return late filing penalties, from you via your tax code.
“You should be able to tell if you have a K code by looking on your most recent payslip. In a K code, the descriptive letter is placed in front of the tax code number, for example K784, rather than after it, such as in the standard 1257L code.”
They said that if you don’t know why you’ve immediately been hit with a letter Ok on your payslip, you should contact HMRC as soon as attainable.
HMRC says about the Ok code: “Tax codes with ‘K’ at the beginning mean you have income that is not being taxed another way and it’s worth more than your tax-free allowance. For most people, this happens when you’re: paying tax you owe from a previous year through your wages or pension; getting benefits you need to pay tax on – these can be state benefits or company benefits.”
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