Income tax help

[SaulGoodman]

Looking for someone to put my mind at ease here since everyone at my company that works in payroll is off until Monday :greengrin

So this morning I got paid and checked my payslip to find out I have been taxed £515 instead of the usual £188

It seems my tax code has changed to “SK663” instead of the usual “S1210L”

The only thing that has changed recently is that I took out a company lease car in November last year, I was told my tax code could change but it looked like the benefit in kind tax would be about £9 odds for the car I was getting.

Please someone tell me this is a mistake and that my lease car hasn’t somehow caused my tax to jump up £327??

Any accountants in the house? And please treat me like an idiot because it’s not something I’m clued up on at all.

[CropleyWasGod]

Looking for someone to put my mind at ease here since everyone at my company that works in payroll is off until Monday :greengrin

So this morning I got paid and checked my payslip to find out I have been taxed £515 instead of the usual £188

It seems my tax code has changed to “SK663” instead of the usual “S1210L”

The only thing that has changed recently is that I took out a company lease car in November last year, I was told my tax code could change but it looked like the benefit in kind tax would be about £9 odds for the car I was getting.

Please someone tell me this is a mistake and that my lease car hasn’t somehow caused my tax to jump up £327??

Any accountants in the house? And please treat me like an idiot because it’s not something I’m clued up on at all.

It will be a cumulative thing.

You haven't paid tax on the car yet. So, in effect, you are paying 9 months in 1 go.

That sounds like £35 per month, approx. Without knowing a bit more detail on your situation, I can't be certain, but I'm guessing that you will pay £35 more in August than you paid in June.

It looks like the benefit of the lease car is around £5,500. Is that about right?

Edit... If you can get into your Government Gateway account, you can see a breakdown of your new code. If you don't have a GG account, HMRC should have posted one to you.

[Rocky]

It will be a cumulative thing.

You haven't paid tax on the car yet. So, in effect, you are paying 9 months in 1 go.

That sounds like £35 per month, approx. Without knowing a bit more detail on your situation, I can't be certain, but I'm guessing that you will pay £35 more in August than you paid in June.

It looks like the benefit of the lease car is around £5,500. Is that about right?

Edit... If you can get into your Government Gateway account, you can see a breakdown of your new code. If you don't have a GG account, HMRC should have posted one to you.

Doesn't the K mean the allowance is negative? So somehow a deduction of £18k has been applied to the tax code, which would tally with just over £300 tax at basic rate. I'd assume that would go on a month 1 basis with such a big impact so it'll recur every month plus there'll be an underpayment for year to date of £900+.

Best guess, they've added the list price of the car in the benefit in kind section, probably an error by payroll.

[SaulGoodman]

Thanks for the replies so far, here’s some more info that might shed more light on the situation.

My tax code the month before I got the car was “S1264L” this then changed to “S1210L” when I got the car in November. This stayed the same until this months random “SK663”

The car is a Salary sacrifice scheme so from my monthly salary of £2587, the cost of the car comes off which is £498, this reduces my salary before tax to £2088

Edit: it’s also a zero emission electric car

Another edit: The only other difference this month is the addition of £517 “abs payment” in my salary as I was off sick last month

[CropleyWasGod]

Doesn't the K mean the allowance is negative? So somehow a deduction of £18k has been applied to the tax code, which would tally with just over £300 tax at basic rate. I'd assume that would go on a month 1 basis with such a big impact so it'll recur every month plus there'll be an underpayment for year to date of £900+.

Best guess, they've added the list price of the car in the benefit in kind section, probably an error by payroll.

D'oh. I didn't spot the K.

I think you might be right about the "benefit" figure being wrong. The only other thing I can think of is a massive underpayment from earlier years now being recouped. That seems unlikely though.

Saul, you need to see the breakdown of your new code on Monday morning. If it's not clear, come back to us (actually, Rocky first as I'm clearly not on the ball 😆)

[Rocky]

Thanks for the replies so far, here’s some more info that might shed more light on the situation.

My tax code the month before I got the car was “S1264L” this then changed to “S1210L” when I got the car in November. This stayed the same until this months random “SK663”

The car is a Salary sacrifice scheme so from my monthly salary of £2587, the cost of the car comes off which is £498, this reduces my salary before tax to £2088

Edit: it’s also a zero emission electric car

Another edit: The only other difference this month is the addition of £517 “abs payment” in my salary as I was off sick last month
The bottom line is that something has been added to your tax code to reduce your tax free allowance from 12100 to MINUS 6630. You need to find your tax coding notice to find out what that something is. Could be 18 grand of untaxed income elsewhere, could be an underpayment from an earlier year, could be a glaring error by your payroll department. As CWG said the HMRC personal tax account online will show you the details from your coding notice (although it's bad enough to get into if you do already have a Government Gateway account, it's a horror show if you don't with the verification of ID setup they use)..

[Rocky]

D'oh. I didn't spot the K.

I think you might be right about the "benefit" figure being wrong. The only other thing I can think of is a massive underpayment from earlier years now being recouped. That seems unlikely though.

Saul, you need to see the breakdown of your new code on Monday morning. If it's not clear, come back to us (actually, Rocky first as I'm clearly not on the ball 😆)
Ha, and I've not worked in tax for 22 years. The pain of K codes will never leave me...

[Mon Dieu4]

Sounds like what happens with my staff mortgage to be honest, I knew I would have to pay tax on it and that's no problem at all, the real issue is despite having the mortgage for years and having all the relevant figures that HMRC miscalcute the amount I owe them every single year, as a result they put me on a different tax bracket to make up for the difference

In my experience there is no point even trying to talk to them about it, they will talk to you for ages on the phone, they will assure you everything is ok, then come June/July you will get a letter advising they are changing your tax code to make up for a shortfall

[SaulGoodman]

Think I’ve found the source of the problem here.

Because it is a company car ,I have to pay a “Car benefit” which is calculated by the BIK value of the car, which varies depending on the CO2 emissions, because my car is fully electric this is 1% of the list price of the car (£60,595). So the “BIK” value of my car is £605.95, you then take 20% of this value (which is my income tax band) meaning I pay £121.19 a year or ~£10 a month extra tax.

For some reason in my tax code notice, HMRC have my Car benefit amount as a whopping £14,542.

So lesson learnt, if you get a letter from HMRC, actually read through it instead of assuming it’s just your standard end of year letter from them.

[Rocky]

Think I’ve found the source of the problem here.

Because it is a company car ,I have to pay a “Car benefit” which is calculated by the BIK value of the car, which varies depending on the CO2 emissions, because my car is fully electric this is 1% of the list price of the car (£60,595). So the “BIK” value of my car is £605.95, you then take 20% of this value (which is my income tax band) meaning I pay £121.19 a year or ~£10 a month extra tax.

For some reason in my tax code notice, HMRC have my Car benefit amount as a whopping £14,542.

So lesson learnt, if you get a letter from HMRC, actually read through it instead of assuming it’s just your standard end of year letter from them.

I'd guess they've got that from your employer somehow. I'd take a look at your 20/21 P11D too to see what that says, could be a bill for last year incoming!

[SaulGoodman]

I'd guess they've got that from your employer somehow. I'd take a look at your 20/21 P11D too to see what that says, could be a bill for last year incoming!

I only took delivery of the car in November 2020 so this month was the first P11D I have had, the thing is everything was fine up until now because electric cars had a 0% BIK charge added on to them, from April 2021 this has been changed to 1% and seems to be where the problem is stemming from, I should have been charged £10 extra starting from this month and instead have been hit with the massive tax charge in error.

I’ve looked at the P11D and there doesn’t seem to be anything amiss, the only thing I’ve noticed is that they have the engine cc down as “1” even though my car doesn’t have an engine :greengrin

It’s definitely a mistake though because even the dirtiest diesel on the market wouldn’t be charged 14 grand tax :hilarious

Will update on Monday when I either get through to the Fleeting company, my company payroll or HMRC.. whoever answers the phone first.

[Rocky]

I only took delivery of the car in November 2020 so this month was the first P11D I have had, the thing is everything was fine up until now because electric cars had a 0% BIK charge added on to them, from April 2021 this has been changed to 1% and seems to be where the problem is stemming from, I should have been charged £10 extra starting from this month and instead have been hit with the massive tax charge in error.

I’ve looked at the P11D and there doesn’t seem to be anything amiss, the only thing I’ve noticed is that they have the engine cc down as “1” even though my car doesn’t have an engine :greengrin

It’s definitely a mistake though because even the dirtiest diesel on the market wouldn’t be charged 14 grand tax :hilarious

Will update on Monday when I either get through to the Fleeting company, my company payroll or HMRC.. whoever answers the phone first.
It'll be your company payroll I reckon, everything is electronic submission these days so it'll sort itself out quicker if they update their end as it'll be automatic. You'll wait months for HMRC to do something about it based on my recent experience of trying to get a tax code sorted. Between that and self assessment they're due me about £6k and it's like getting blood from a stone.

Incidentally, bear in mind that a BIK charge / tax code restriction isn't actually the amount of tax. It's the amount chargeable to tax, i.e. if you have £10k BIK in tax code and pay tax at 20% it'll collect £2k.

[Onceinawhile]

Mostly been covered on here, but my job is personal tax and p11ds.

If you want a chat to go over it, shoot me a message.

[Onceinawhile]

It’s definitely a mistake though because even the dirtiest diesel on the market wouldn’t be charged 14 grand tax :hilarious


Top rate of benefit is 37%. If you car has high cost emissions, you do not need an expensive car to top that.

[SaulGoodman]

Mostly been covered on here, but my job is personal tax and p11ds.

If you want a chat to go over it, shoot me a message.

Appreciated, perhaps I will on Monday if I can’t get any answers :greengrin

[SaulGoodman]

Top rate of benefit is 37%. If you car has high cost emissions, you do not need an expensive car to top that.

Well that much is true, if my car was on the top rate it would be £22,420 BIK. But then I would pay 20% of that because of my income tax bracket.

Regardless the car is 0 emissions so it shouldn’t be anywhere near that much.

[SaulGoodman]

Sorry for yet another post but I think this mystery has finally been solved;

As above, I should pay £121.19 a year benefit in kind, this would obviously be divided by 12 to give us our monthly cost.. but what happens if you multiply that £121.19 by 12 instead?

You get £1454.28..
Now what does HMRC have as my car benefit? £14,542.. now that’s not a coincidence is it? Has someone perhaps multiplied by 12 instead of dividing :duck:

Sherlock Holmes eat your heart out

I have an even greater respect for you people that do this for a living because my head is absolutely burst

[Rocky]

Sorry for yet another post but I think this mystery has finally been solved;

As above, I should pay £121.19 a year benefit in kind, this would obviously be divided by 12 to give us our monthly cost.. but what happens if you multiply that £121.19 by 12 instead?

You get £1454.28..
Now what does HMRC have as my car benefit? £14,542.. now that’s not a coincidence is it? Has someone perhaps multiplied by 12 instead of dividing :duck:

Sherlock Holmes eat your heart out

I have an even greater respect for you people that do this for a living because my head is absolutely burst
It won't be that reason exactly although the numbers still arrive at the same. The amount that should be in tax code is the value of the taxable benefit, which from what you're saying is £60,595 x 1% = £605. This will collect tax at your marginal rate of 20%, i.e. £121. It looks like they've somehow come to a BIK charge of 24% of list price, probably by entering incorrect emissions details.

[SaulGoodman]

It won't be that reason exactly although the numbers still arrive at the same. The amount that should be in tax code is the value of the taxable benefit, which from what you're saying is £60,595 x 1% = £605. This will collect tax at your marginal rate of 20%, i.e. £121. It looks like they've somehow come to a BIK charge of 24% of list price, probably by entering incorrect emissions details.

Ahh yeah you’re bang on with that, looking at the table online a BIK charge of 24% would be for a car with an emissions value of 100-104 G/KM.

I’m just glad it’s definitely looking like an error and I’m not going to have to find an extra 300 odd pound a month for the duration of me having this car!

[SaulGoodman]

Managed to make a government gateway account today after raking out my passport.

Turns out they had my car down as a petrol and not electric, thus causing the high BIK cost, seemed easy enough to edit this online and it now shows the correct BIK cost as £605.

Just waiting on my tax code updating now which can take up to 48 hours, I’ll probably still phone up on Monday and just re-iterate to an actual human that my car is electric and not petrol, although I would imagine it’s a mistake on my works end and not HMRC.

Thanks to CropleyWasGod,Rocky,MonDieu4 and OnceInAWhile for your insights.

[Onceinawhile]

Glad you got it sorted. Do you know who prepares your p11d? If it internal or outsourced?

I'd try and get in touch with them and get them to make sure they have the car down as electric as you might end up with the same issue next year.

Technically, they should resubmit a p11d updated too, but it's a waste of time as that hmrc office is a black hole for amended p11ds.

[SaulGoodman]

Glad you got it sorted. Do you know who prepares your p11d? If it internal or outsourced?

I'd try and get in touch with them and get them to make sure they have the car down as electric as you might end up with the same issue next year.

Technically, they should resubmit a p11d updated too, but it's a waste of time as that hmrc office is a black hole for amended p11ds.

It’ll be internal. It’s East Lothian council so I would’ve thought they’d do a lot of P11D’s per year. I’ll get in touch with them anyway and let them know what happened.

First one to say “bloody council” wins a tenner :greengrin