Tax codes

[phunkyphantom22]

Here's a good question....

How do I work out exactly what tax code I should be on to ensure IR are not taking too little/too much money off of me?

I have private healthcare and owe them £80 from 03/04 (why it's taken this long to take I am not sure!), although I apparently now only owe them £13.42.

[Carlykittens]

£80 is the amount of tax that should have been paid on your private medical benefit. Working it backwards I make your 2003/2004 medical benefit to be £364.

Your 2003/2004 P11D would not have been received or processed by HMRC until halfway through 2004/2005. Your code should have then been updated to show personal allowance of £4895, less medical benefit of £364, less a restriction of £364 to account for the 03/04 underpayment. Your 2004/2005 tax code should have looked something like 416L X. Unfortunately unless you jump at and down at HMRC protesting about your under / overpayment, it's a case of waiting for your name to come up on an open list for review. The open lists aren't always high priority work.

There are many reasons why you now only owe £13.64. Once you have been assessed for 2003/2004 they carry on and assess 04/05 and 05/06. You could have been overpaid in 2004/2005 and 2005/2006 and any resulting overpayment could have been offset against the underpayment for 03/04. I calculate to collect an underpayment of £13.42 a restriction of £61 would have to be applied to your tax code (assuming your highest rate of tax is 22%) The maths are as follows: £13.42/22 x 100

Hope that helps?

Carly.