Tax Code Questions

Has anyone else got the tax code LX? I’ve had it from Jan but only just realised! Anyone any ideas before I contact HR tomorrow? Cheers!

LX ??

I’m XTR 😉

received 2 tax codes the other day – identical but a grand out on my standard personal allowance. What is standard, 6667 or 7667 ?

Lol I would be XTR if it weren’t for this blasted tax lol

I’m 630LX but I used to be 647L not sure what limit was though I think it was about 7k+

Guess I’m paying too much anyway

No idea what the X is but the 630 part of it means you’re allowed to earn £6300 before being taxed

The X just means you are being taxed on a “Week 1/Month 1” basis, and unless you’ve had any months with no income in 2010/11, then your tax will probably be correct

In any case, it’s probably too late for your employer to change anything, because we’re approaching the end of the tax year

Is this sufficient, or would you like an explanation of the cumulative basis for calculating PAYE?

Cheers esme that’d be great if you’ve got the time :o)

Okay, here goes . . .

Your Personal Allowance for 2010/11 is £6,300, which means you can earn £6,300 before you pay any tax (for most people it’s £6,475).

Let’s say, for example, that you earn £2,100 per month. You probably wouldn’t be very happy if you paid no tax at all for Months 1, 2 and 3, then suddenly your salary dropped by 20% for the rest of the tax year (once you’d hit the £6,300 PA limit).

The PAYE system smoothes out the tax, so that you receive the same net amount each month. In your case, you are entitled to earn £525 tax-free each month (approx £540 for others) ie £6300 / 12

However – and this is the clever bit – the PAYE system is self-correcting, so if you had no income for a period, then the “unused” chunks of Personal Allowance normally get transferred into subsequent months when you next get paid.

The way it usually works is that tax is calculated on how much you’ve earned so far in the tax year, less the accumulated chunks of PA.

So, in Month 2 (May), it would be:
Gross 2 months @ £2,100 = 4,200
Less PA 2 months @ £525 = 1,050
Taxable = 3,150

And in Month 10 (January) , it would be:
Gross 10 months @ £2,100 = 21,000
Less PA 10 months @ £525 = 5,250
Taxable = 15,750

Next installment:

But if you hadn’t worked in Months 6 and 7, it would be:
Gross 8 months @ £2,100 = 16,800
Less PA 10 months @ £525 = 5,250
Taxable = 11,550

so you still get the benefit of the chunks of PA for Months 6 and 7, even though you didn’t work in those months.

HOWEVER, in your case, you are on a “Week 1/Month 1” tax code (signified by the X) which means that YOUR tax is not being calculated on a cumulative basis, but on a stand-alone basis for each month.

If there are any months in 2010/11 when you didn’t work. then you may have some unused chunks of PA. Otherwise, your tax is probably okay.

I’d wait until you’ve received your P60, then ask HMRC to check the figures.

Linky 🙁

Apologies Esme,

Indeed I am appreciative of all the help given to me by anyone responding to a post on STW. I do always on any post I write add – cheers or thanks, at the end of the first post as a way of thanking anyone who has read the post or goes on to answer it. In fairness I almost always reply with thanks but in this case was otherwise waylayed.

Apologies again for not replying with thanks, the info on the TAX breakdown is brilliant

Many thanks
Dan