Retrospective application of employee tax code

Question asked by Pete 7 years ago

My company has been paying a salary to myself as a director employee tax code 1100L. I have been drawing only £1000 p.m. (= salary £671.67 and dividend £323.83)

I quailified for state pension in August but at the time decided not to draw the pension. However I recently contacted DTP and applied to draw the pension. They suggested they can backdate it to August which they did.

I got a letter from HMRC with new tax code, 600L X.

The letter does state This tax code should match those shown on any future payslips you receive. I'm not sure if that means payslips from now, or from August, and if so do I need to go back and redo the payslips?

Thanks

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4 Replies

Your PAYE calculations will be different depending on the Tax code in use.

In the case you have outlined above I do not believe it will make a difference as what you have paid your self as salary £671.67 would not reach either of the thresholds for both the 1100L (£11000) or 1150L (£11500).

671.67 * 12 = 8060.04

This falls well within the tax-free allowance.

The same applies in regard to your £5000 dividend allowance.

323.83 * 12 = 3885.96.

Financially I don't believe this would make a difference but technically I would double check with your accountant to verify.

Best answer
7 years ago

Hi Pete,

I would expect that the new tax code would apply from the point that you receive it moving forward, not retrospectively.

If there is any confusion or uncertainty I would always recommend contacting HMRC to get clarification.

7 years ago

OK, finally got through to HMRC who have said to change it only for this month (month 12)

HOWEVER

From April 2017 I have had the incorrect code of 1100L instead of 1150L, so a slightly different questyion now:

Do I need to change it, go back and redo the monthly payslips, or just leave them for now and make sure my accountant is aware of this when I give him my P60

7 years ago

Your PAYE calculations will be different depending on the Tax code in use.

In the case you have outlined above I do not believe it will make a difference as what you have paid your self as salary £671.67 would not reach either of the thresholds for both the 1100L (£11000) or 1150L (£11500).

671.67 * 12 = 8060.04

This falls well within the tax-free allowance.

The same applies in regard to your £5000 dividend allowance.

323.83 * 12 = 3885.96.

Financially I don't believe this would make a difference but technically I would double check with your accountant to verify.

Best answer
7 years ago

Thanks

7 years ago

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