- November 23, 2023
- Posted by: legaleseblogger
- Category: Related News
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Subject: HMRC PAYE Code Change and Impact on Take-Home Pay
Dear Sir/Madam,
I am writing to address the recent notification I received from HMRC regarding the change in my PAYE code from **1257L** to **S1043L** **M1**. This adjustment has resulted in a reduction of £200 in my take-home pay in my last payslip. While this may not seem like a significant amount, it has had a notable impact on my budget, especially considering the recent purchase of a property and ongoing renovation expenses.
I am concerned about the reason behind this change and whether it will affect my future take-home pay. I am also perplexed by the fact that my salary has not changed since April 2023, and even with a heavily taxed bonus, I should not have exceeded the £50k a year tax threshold. Additionally, I am enrolled in a pension scheme with my employer, where I contribute 3% of my salary to ensure that I remain well below the taxable threshold.
Given the complexity of payroll and my limited understanding due to English not being my first language, I would greatly appreciate any assistance or insights to clarify this matter.
As a solution, the AI Legalese Decoder can help by analyzing the notification received from HMRC and deciphering the legal jargon to provide a clear understanding of the changes in the PAYE code and its potential impact on take-home pay. Additionally, it can assist in identifying any errors or discrepancies in the calculation of taxes and deductions, helping to ensure that your pay aligns with the applicable tax regulations and employment terms.
Your prompt attention to this matter would be greatly appreciated. I am willing to provide any additional information or clarification as required.
Sincerely, [Your Name]
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****** just grabbed a
> 1257L to S1043L M1
Let’s talk about what this change actually means. Your tax code has changed from 1257L, which means that you have a Personal Allowance of ┬ú12,570 and pay tax using the English Income Tax rates to S1043L M1, which means that you have a Personal Allowance of ┬ú10,430 but your Income Tax is based on your earnings in a particular pay period (i.e it’s non-cumulative, that’s what the M1 means) and **not** what multiplying that by the number of pay periods indicates you’re going to earn in a year. The S means you’re paying Income Tax at the Scottish rates, which differ slightly from the English rates, so I’m assuming you’re currently a tax resident in Scotland. The differences in the [Scottish Income Tax rates](https://www.mygov.scot/income-tax-rates-and-personal-allowances) mean that you’re taking home less due to that, as well as your Personal Allowance (the amount you can earn without paying tax on) decreasing. The main differences between the Scottish and English Income Tax rates are that in Scotland there’s a starter rate (19% from ┬ú12,571 to ┬ú14,732), an intermediate rate (21% from ┬ú25,689 to ┬ú43,662) and the higher rate threshold is lower and the amount of tax payable is higher (42% from ┬ú43,663 to ┬ú125,140).
Therefore, the Scottish Income Tax rates mean that you’ll take home less even if your Personal Allowance was still ┬ú12,570.
> could it be a mistake?
The S prefix (Scottish Income Tax rates) isn’t a mistake unless you’re not resident in Scotland. If in the unlikely event you’re not resident in Scotland, then it is a mistake.
There are quite a few different reasons that could explain why your Personal Allowance has decreased at this time of year. My Personal Allowance changed just under a month ago due to earning savings interest (this is based on the savings you had in the **last** financial year, so if you had a load of savings that you’ve subsequently used for a deposit, then that’ll explain what’s up with your Personal Allowance). The way to find out why HMRC have changed your Personal Allowance is to create a Personal Tax Account at https://www.gov.uk/personal-tax-account/prove-identity, sign in and then once you’ve signed in, go to https://www.tax.service.gov.uk/check-income-tax/tax-free-allowance (if you’d prefer not to click on these links for security reasons, you can type them manually into your URL bar). Then, if you look under “Deductions”, it’ll tell you why your Personal Allowance has been reduced.
Did your employer give you a P11D for any company benefits for the tax year ending 5 April 2023?
And if you earned interest to 5 April, the banks will have told HMRC too, that can also change your tax code.
But the **M1** should be questioned, that could be a mistake.
On your PAYE notice it should explain why your tax code has changed. If not give HMRC a ring, there will be a long wait but they should be able to explain it to you.
This happened to me when I got a large bonus in April.
HMRC thought I was going to earn over 100k.
I downloaded the HMRC app, signed up and altered my estimated annual earnings. That sorted it.
Have you taken anything out recently that is a benefit in kind? Staff rates on loans/mortgages, company car etc?
Hi /u/raccoonrealtor, based on your post the following pages from our wiki may be relevant:
– https://ukpersonal.finance/budgeting/
– https://ukpersonal.finance/pensions/
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