Will I start next tax year with a K code if I’m on one right now?

[peteza]

I wonder if that title is specific enough for the fussy bot.
I changed employers in Sept last year, HMRC kept overestimating my income thinking I was working the old job as well (despite having received my P45) Eventually arrived at a tax code they later decided was too low. Ended up on a K code and clobbered for tax for the rest of the year. (there was no bonus or other income that resulted in underpayment, I’ve truthfully stated my correct gross salary) It is what it is but I don’t want to start the new tax year with a K code. My understanding is that the K code is to ensure I pay correct tax in the current year without impacting next tax year.
Will I start next tax year with a normal tax code? Or do I have to do something to ensure this.
Please feel free to explain stuff like I’m 5, I absolutely hate our tax system and barely understand it even tho I’m gen X age group.
Thank you!

 

[soulier32]

@peteza

My understanding is that the K code is to ensure I pay correct tax in the current year without impacting next tax year.

The K code simply means your entire tax free allowance has been wiped off the code and has gone into 'negative'. Has nothing to with next year's code.

However, generally when it comes to ANY tax code reduction for when they estimate you've not paid enough tax for the current tax year, it'll try to sort it out this year rather than letting it carrying on into the next. The later in the tax year this happens, the smaller timeframe they have to collect it so the hit to the tax code is greater (eg; £1K spread over 3 months instead of 12)

For next year, go here https://www.gov.uk/personal-tax-account and ensure your estimated income and any employment benefits you may have are correct.

They generally do start setting out next year's codes before April so keep an eye out in your tax account and you should have notice of what tax code you'll be on in April.

 

[peteza]

@soulier32 !thanks

 

[peteza]

@soulier32 Ah now thats a confusing one for me, when I entered the info for my current employment HMRC told me to put in a figure I’d earn for the current tax year. Because its a part year that figure isn’t going to be correct for the new tax year. Do I keep an eye out for that new code then enter a full year taxable income? I don’t want to change the current year taxable income figure as my tax code might change again.
Maybe I should just start a new job on 6 April haha

 

[carrico]

@peteza The K code is a negative tax code that is used to reclaim underpaid tax that exceeds what can be reclaimed through the removal of personal allowance (eg if you already have a reduced or zero PA).

Assuming the payments taken this year are enough to reclaim the underpayment then yes, you will return to your standard tax code from april

 

[peteza]

@carrico !thanks

 

[peteza]

@carrico Thank you!

 

[johnfrancis]

@peteza Look at the coding notice, it'll tell you why you have a 'negative' code this year.

If they're things that won't persist next year (e.g. to collect an underpayment) then you probably won't have one next year

If they're things that will or might be expected to (e.g. £120k+ salary, company car, larger interest incomes) then you probably will

 

[peteza]

@johnfrancis It just says the estimated tax I owe this year has increased, if I’m looking at the right thing online - ‘your tax code change’. Can’t find anything explicitly calling itself a coding notice. There’s mention in the ‘how we calculated’ of underpaid tax, medical insurance from my former employer, looks like a whole year value though. And on my payslips the K code has M1 on the end even tho I’ve been on that code since November, does M1 mean month 1?
If by any chance I end up paying too much tax this year does that sort itself out at some point?

 

[johnfrancis]

@peteza M1 means on a M1/W1 basis - i.e. each pay period is considered as if it was the first in the tax year, rather than "trued up" based on running totals. This is fairly normal for in-year adjustments for underpaid tax. If most of the adjustment is underpaid tax, it's likely that won't be there next year as you should have finished paying it by then (that's what the adjustment is for)

It should theoretically sort itself out, perhaps with a small adjustment to code next year to iron out any slight deviation of money owning or owed - do you submit a tax return? if so that will be a more certain way of ensuring it's all right.

 

[peteza]

@johnfrancis Ah makes sense, thank you for that. I normally do a self assessment but have received a message from HMRC saying I don’t need to any more. Thanks again for taking the time to reply!

 

[peteza]

@johnfrancis !thanks