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Enemy of Apathy

Today in The Herald, there was an article about general taxpayer ignorance and apathy about our glorious tax system coinciding with the inexcusable failure of HMRC to properly manage their affairs - our affairs. If you want to check out the online version of the article, it's here.

 

It made me wonder just a little if maybe I could help with reducing ignorance by publishing some practical and simple information. As far as the apathy goes, I can do nothing about that!

 

So lets make a start. The whole tax code business is probably as good a place as any.

Your tax code is a single number which is an aggregate of your personal allowances and any expenses you can claim back LESS anything you need to pay in tax from a previous year or for a company car etc. An example will make this much clearer:

Your employer gives you a company car. The value of the benefit in kind for tax purposes is £5000. You can claim £200 for tax deductible subscriptions.

Assuming you are of working age,

 

Personal Allowance £6475

 

Add: Subscriptions £ 200

Subtotal £6675

Less Car benefit £5000

Total Allowances due £1675

To turn this into a tax code, we simply chop off the final number so the tax code becomes:

167L

The letter L signifies the sort of personal allowance included.

Your employer now applies this tax code to your pay. A tax code of 167L means that you will be able to receive £1675 divided by 12 as tax free pay each month.

You pay tax on the rest at 20% or if "the rest" is more than £ 3117, the bit above £3117 is taxed at 40%. There is a still higher rate but we're not going there right now.

So that's really all there is to it.

Here's what you need to do next:

Look at your last payslip and see what tax code is shown. If its 647L, you probably don't need to do anything about it UNLESS you think you should be getting tax deductible expenses OR you have a company car!

If your code is NOT 647L, phone HMRC and ask them to explain what has been done to the code unless you already know why it is different. Don't wait for the coding/ underpayment statement (P800) to arrive.

If you don't feel you can do this yourself give NGM a call and we may be able to help you understand what is going on in your coding - it's free so don't not do it.

Comments: 4 (Add)

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Julie on July 23, 2012

I am helping a ferind plan her wedding for June 2012 in the little town of Ear Falls, Ontario (two hours NW of Kenora).Could you please send me your pricing information for weddings.Thank you so much!!

Cody on July 23, 2012

Hey i love the photos u have! I was just wnnoeridg how much it costs for you to do family photos??? I have 2 girls one 5 months and one is 3 and myself and my husband Live in Langenburg sk. just comparing prices thanks very much and hope to hear from you soon.Missy

Paul on April 28, 2012

Melissa Lenhoff (on behalf of Round Lake Middle School):Each year the stentdus at Round Lake Middle School (IL) proudly raise money to donate, as they believe that every child should have the opportunity to receive healthcare and a good education, regardless of their socioeconomic status. We applaud AAV's efforts and will continue to support them as best we can!

Gertie on December 30, 2011

That's 2 cveelr by half and 2x2 clever 4 me. Thanks!