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The following free information may be useful to you:

Tax codes
Enquiries
Refunds
Penalties
Charitable donations

Tax codes

How does my tax code work?

Your tax code works by giving you a certain amount of tax free income each year. Reducing the tax free amount means you pay more tax. If this is done correctly the extra tax you pay can be made to equal the tax you owe. However, the reduction appearing on your coding notice will not be the same as the tax you owe. For example, you might owe £500. If you pay tax at 20%, your code would go down by £2500. (At 20%, the tax on an extra £2500 is £500.) Your tax code should show both the amount you owe, and also the actual adjustment needed to collect it.

Your tax code is made up of allowances and deductions. First of all you add up your allowances, then you take away all your deductions. Assuming the result is a positive number, it is taken away from your total taxable income before tax is calculated.

For instance, a code 552L may comprise Personal Allowance of £5435, plus flat rate job expenses of £85, giving a total of £5520. This is the amount of your tax-free allowances. The code is simply this number with a letter substituting the final digit.

My tax code has a K in it? Is this unusual?

A tax code including a 'K' indicates that your deductions exceed your personal allowances and reliefs available. Whereas a normal tax code gives you a tax free amount over the tax year, with a 'K' code you have no tax free amount and instead are charged additional tax to cover the shortfall.

Can I question my Tax Code? I do not think it is right. :

If you do not think that your tax code is correct, you should always query it. You can do this by contacting your professional advisor or contacting H M Revenue & Customs directly and providing them with up to date information.


Enquiries:

I have received a letter from H M Revenue & Customs saying that they intend to make an enquiry into my tax return. What does this mean?

H M Revenue & Customs can make an enquiry into any self assessment return within 12 months of the filing date. The enquiry may be into a specific item shown on the return or just a general query. You should always respond within 30 days and seek professional advice where you are unsure.


Refunds:

I might have paid too much tax during the last tax year and I think I might have overpaid in previous years as well.  Can I get this tax back?

Yes, you may claim tax back for up to six years for allowances or reliefs that you have not previously claimed.  We will be happy to review all the years in question.


I don't have all the information going back 6 years.

No problem, after you complete our signed authority to act form, we can request the exact information from all of your income sources going back 6 years.


Penalties

I am not sure what the deadline is for filing my Tax Return form.  Will I be charged with any penalties?

The deadlines for submitting your Self Assessment tax return change from 2008-09.

• The deadline date for paper tax returns will change to 31 October
  
• The deadline for online tax returns will be 31 January

If you do not file your self assessment form by the above dates the penalties for late submission are:-

• £100 if not filed by 31 October or 31 January (see above) or 3 months from date of issue whichever is later
• Additional £100 if not filed 6 months after the filing date

H M Revenue & Customs can apply to the General commissioners to impose further penalties of up to £60 per day, in certain cases.

The £100 fixed penalties cannot exceed the amount of tax that remains outstanding at the due date of the tax return. Additionally, no penalty applies if a repayment is due. This does not apply to the daily penalties.

Charitable donations

I pay income tax at 40% and make charitable donations to registered charities.  Will I get any tax relief?

Yes, you are entitled to relief at your top rate of tax on all gift aid donations.  The cash amount donated is treated as being net of basic rate tax of 22%.  As you are a higher rate taxpayer you will get the extra relief by adjustment to your PAYE code or through the self assessment form.


Rates - Income tax, capital gains tax, and inheritance tax
 

£ per year (unless stated)	2007-08 (£)	2008-09 (£)
Income tax personal and age-related allowances
Personal allowance (age under 65)	5,225	5,435
Personal allowance (age 65-74)	7,550	9,030
Personal allowance (age 75 and over)	7,690	9,180
Married couple's allowance*                                    (aged less than 75 and born before 6th April 1935)	6,285	6,535
Married couple's allowance* (age 75 and over)	6,365	6,625
Married couple's allowance* - minimum amount	2,440	2,540
Income limit for age-related allowances	20,900	21,800
Income limit for age-related allowances	20,900	21,800
Blind person’s allowance	1,730	1,800

                                                               
                                                                      

Capital gains tax annual exempt amount	1,730	1,800
Individuals etc.	9,200	9,600
Most trustees	4,600	4,800

                                                          
 

Individual inheritance tax allowance

300,000

312,000

                                                                             

Pension schemes allowances
Annual Allowance	225,000	235,000
Lifetime Allowance	1,600,000	1,650,000

                                                            

*Married couple's allowance is given as a 10% tax credit.

 
Income tax: Taxable bands

2007-08 £ per year                              2008-09 £ per year

Starting rate: 10% 0-2,230                     - -
Basic rate: 22% 2,231-34,600             Basic rate: 20%* 0-36,000
Higher rate: 40% Over 34,600             Higher rate: 40%** Over 36,000

*Savings Income only: If your savings income is less than £2,320 in the year, you are taxed at 10%. 

** Dividend Income: Dividends are still taxed at 10% unless you are a higher rate taxpayer when you pay 32.5% on the higher rate element.
           


If you are unable to find a free solution to your query and require bespoke advice please use our Interactive Services.  These fixed fee services will provide you with cost effective email, telephone or face to face support solutions to help you come to grips with your problem; by using these fixed fee payment in advance processes you will always be in control of your cost exposure.

 

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Updated Daily: Wednesday May 21st 2008