News1 min ago
Tax codes
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Could someone please explain the tax code K in simple terms please? My husband has a state pension, a small company pension and has just started a van driving job working every other week. His first pay packet has had exactly 50% tax deducted, which was a bit of a shock, the tax code is K134. Tax has always been deducted from his company pension so does this mean that will still happen and that he will also have to pay half his wages in tax? I f so there is no point at all in carrying on with the part-time job.
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This may help:
http://www.hmrc.gov.u...ax/codes-basics.htm#3
The text includes: "If your deductions (untaxed income on which tax is still due) are more than your allowances you'll be given a K code, to ensure you pay tax on the excess. Whereas with other tax codes the number indicates the amount of income you can have tax-free, the number in a K code multiplied by ten broadly indicates how much must be added to your taxable income to take account of the excess untaxed income you received.
The main aim of a K code is to collect tax on:
•benefits in kind
•state benefits
•underpayments of tax
When a K code is operated, your tax deduction for each pay period cannot be more than half of your gross pay or pension. Your employer or pension provider restricts the amount of tax deducted using a K code to make sure that you retain a certain amount of take home pay or pension. If more tax is due it will be collected at a later date.
I think this suggests he isn't already paying the full tax due on his pension, probably because he isn't paying tax on his state pension at source. the highest marginal rate will be 20& unless he's earning nearly £40000pa
It won't be right that he'll lose half his wages in tax- overall he still gets a basic rate allowance and pays 20% tax on the rest.
http://www.hmrc.gov.u...ax/codes-basics.htm#3
The text includes: "If your deductions (untaxed income on which tax is still due) are more than your allowances you'll be given a K code, to ensure you pay tax on the excess. Whereas with other tax codes the number indicates the amount of income you can have tax-free, the number in a K code multiplied by ten broadly indicates how much must be added to your taxable income to take account of the excess untaxed income you received.
The main aim of a K code is to collect tax on:
•benefits in kind
•state benefits
•underpayments of tax
When a K code is operated, your tax deduction for each pay period cannot be more than half of your gross pay or pension. Your employer or pension provider restricts the amount of tax deducted using a K code to make sure that you retain a certain amount of take home pay or pension. If more tax is due it will be collected at a later date.
I think this suggests he isn't already paying the full tax due on his pension, probably because he isn't paying tax on his state pension at source. the highest marginal rate will be 20& unless he's earning nearly £40000pa
It won't be right that he'll lose half his wages in tax- overall he still gets a basic rate allowance and pays 20% tax on the rest.
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