tax code question

[annie49]

My sons tax code is changing from K145 to K186 and he is wondering if this means he is going to be paying slightly more tax. Can anyone advise please?

[NazNomad]

If your tax code is a letter ‘K’ followed by a number, it means that the total allowances in your code are less than the total deductions to be taken away from your allowances. In this case the number is added rather than deducted to determine the taxable income. For someone earning £20,000 with a tax code of K475 the taxable income would be £24,759.

Adjust the figures according to your son's income :-)

[annie49]

Thanks NazNomad I think it means he will be paying slighty more in the month.Thanks for your advice

[factor-fiction]

It is unusual I think to have a K code. Is the reason known why he has a K code and is the K coding definitely correct?

[NazNomad]

Not unusual ... If your deductions are more than your allowances you'll be given a K code, to ensure you pay tax on the excess.

[factor-fiction]

... by unusual I mean it probably applies for less 10% of taxpayers. I can't think of many reasons (eg high value company car) why someone would have deductions which exceed their allowance.

[annie49]

He does have a company car but not at his disposal for 'private use'

[factor-fiction]

So he shouldn't be taxed on that as a benefit in kind, so perhaps he owes quite a large sum of underpaid tax from a previous tax year.

[twix123]

The taxable benefit of a company car is now quite high and the original cost of a 'fully loaded' saloon car (say £25k to £30k), with a high emission engine, easily uses up the full value of the standard allowance of £6475, resulting in a K coding.

The increased tax will only work out at between £82 and £164 per annum depending on whether he is a higher rate tax payer or not.

[Skyline D]

Lots of people have a "K" code, though it is undeniably a minority of the population. I wouldn't have used the word "unusual" (I see it a lot) but it's not something the majority of regular employees will ever have. Tends to be high earners and company directors. High value company cars are the main cause but also benefits like health insurance, home phones or tax underpaid from previous years, etc can cause it.

Annie49 - He either has a company car or he doesn't. There's no middle ground. If the business has a pool car that remains at work and can be used only for business journeys and returned to work directly then it isn't his car and he shouldn't be taxed on it. If it goes home with him at night then it is a company car and will be taxed accordingly. Journeys to and from work are private use I'm afraid. Twix is correct about the extra tax cost of the code change.