Getting rid of a K tax code

[concord]

Hello. I have a K tax code and the amount (ie the number after the K) increases each year. My company pays a low salary and dividends and I don't have any other income.

My accountant says I can ignore it because HMRC is just trying to collect more tax throughout the year instead of twice a year. They say that all that matters is the income declared on my self assessment.

Has anyone ever had a K tax code and called HMRC to "fix it"? What would I say to them?

Thanks.

[WTFH]

Hello. I have a K tax code and the amount (ie the number after the K) increases each year. My company pays a low salary and dividends and I don't have any other income.

My accountant says I can ignore it because HMRC is just trying to collect more tax throughout the year instead of twice a year. They say that all that matters is the income declared on my self assessment.

Has anyone ever had a K tax code and called HMRC to "fix it"? What would I say to them?

Thanks.

What you need to find out is why you have a K code. The K means you are paying less tax than you should. If it's increasing each year, that means you're consistently doing it.
It could be because you're claiming benefits that you shouldn't be, or that you're buying things through the company that are for personal use, or that your accountant isn't submitting the correct figures in your tax return.

You'll be able to get HMRC to fix the K code when you've found out why you have one in the first place, and your accountant is where to start. If you get nowhere with them, then contact HMRC and ask them to explain why you're on a K code.

[concord]

Ok thanks for the tip. I don’t receive benefits or believe I actually actually owe any more tax. The self assessment figures are very simple.

My salary and dividend income is the standard breakdown you can find on many accounting blogs minus the pitiful interest from a standard high street current account.

I will call HMRC and query this.

[WTFH]

Ok thanks for the tip. I don’t receive benefits or believe I actually actually owe any more tax. The self assessment figures are very simple.

My salary and dividend income is the standard breakdown you can find on many accounting blogs minus the pitiful interest from a standard high street current account.

I will call HMRC and query this.

Who is your accountant?

[Peoplesoft bloke]

K codes are generally used to recover outstanding tax from previous years or for people with huge amounts of taxable benefits in the current year.

There is (little known) statutory limit so even using a K code they cannot take more than 50% in tax in a period.

Ringing HMRC to ask what they are doing is definitely a good plan.

[Maslins]

Are your total earnings >£100k? If so, you'll lose some/all of your personal allowance.

Also you might have a historic personal tax underpayment that HMRC are trying to collect via PAYE.

Or maybe whoever submitted your personal tax return chose the option to try to collect some of your personal tax bill via PAYE.

Plus a few other options as mentioned by others above.

It's impossible for us to guess what the reason is for this, but typically when HMRC write to you advising of the tax code, they'd include calculations as to how they got to it.

However, where your salary is trivial (ie £719/month or similar) and vast majority of your income is via dividends, tax codes do become a bit irrelevant.

[concord]

Thanks for your input. I haven't called HMRC yet but I found a page on the HMRC tax dashboard that gives me a breakdown of my tax free allowance. It says I owe over £15k in tax on dividends, which must be wrong. I'm not sure where that comes from.

The K tax code started a couple of years ago and recently doubled but I'm not sure how. My accountant says to ignore it but I want to make sure that a mistake hasn't been made somewhere.

My income has always been around £719 (depending on the year) plus dividends that account for a tiny amount of savings income.

I'll need to query this.

[WTFH]

Thanks for your input. I haven't called HMRC yet but I found a page on the HMRC tax dashboard that gives me a breakdown of my tax free allowance. It says I owe over £15k in tax on dividends, which must be wrong. I'm not sure where that comes from.

The K tax code started a couple of years ago and recently doubled but I'm not sure how. My accountant says to ignore it but I want to make sure that a mistake hasn't been made somewhere.

My income has always been around £719 (depending on the year) plus dividends that account for a tiny amount of savings income.

I'll need to query this.

OK, you're skirting the problem.
The code doubled because whatever you did the previous year has been repeated on the next year. It will keep increasing.
The money you have taken from your company each year - has it only ever been around £700 per month? Have you taken any dividends from the company?

[concord]

Yes, the company paid dividends very much like option 2 from this blog: Optimum Salary and Dividends 2019/20 - Limited Company Directors - JF Financial My accountant advised the same although I reduce the dividend slightly to account for the small interest earned from my current account.

I’ve been doing this for several years but the K tax code started two years ago. I think I also started paying “predicted tax” prepayments twice a year around the same time but I’m not sure if that’s related.

My self assessments are correct and I have no other income or benefits of any kind. My question is really about what the inputs are for these tax codes and how they are generated. Also, do they really matter if my self assessment is correct?

I’ll need to speak with HMRC as it seems like it’s either a mistake on their end or my accountant is somehow inputting figures that generate an incorrect tax code.

[BR14]

HMRC sends you a notification of any tax code change, and an overview of why it's been decided.
it's up to you to talk to them if you think it's wrong.
<yes, i know, it's not fair, but that's how it is>