Personal Allowance Reduction Personal Allowance Reduction
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  1. #1

    Nervous Newbie


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    Default Personal Allowance Reduction

    Hi

    After 8 years with my Ltd company I'm now going via a brolly for the first time. I haven't chosen one yet and i'm trying to get and answer to the following question. My day rate will take me over 100k earnings for the year so how and when does the reduction in personal allowance kick in? I asked 3 different companies and had 3 different answers:

    Company1. You'll have to sort it out yourself via self assessment.
    Company2. HMRC should issue an updated coding notice after month 1 based on estimated earnings.
    Company3. HMRC should issue an updated coding notice once your earnings reach 100k.

    Totally confused now. I know there's things I could do like pay into a pension to keep me below 100k but I just want to know what the process is. I'd rather it was somehow done via PAYE rather then SA. But then I might be out of work in 6 months and not reach the limit so I'll have overpaid.

    thanks

  2. #2

    My post count is Majestic

    northernladuk's Avatar
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    Jus take sure you pick one that allows unlimited pension offerings if that is a key for you. Many don't and it's not a standard offering.

    Speak to Lucy at Clarity about it. They allow unlimited payments.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  3. #3

    Super poster


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    If you are earning 100K a year surely you can afford to let the SA sort it out for the few grand involved !? Paying as much as you can afford into a pension is a no brainer if you are via a brolly and into the higher rate tax bands. I've not long started using a brolly for the first time, I found one with unlimited pension payments into your own choice of SIPP. Seem very efficient so far but time will tell.

  4. #4

    Fingers like lightning


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    Hi Heathmount
    OK let me see if we can help...

    Quote Originally Posted by Heathmount View Post
    Company1. You'll have to sort it out yourself via self assessment.
    Shouldn't need to do this, as the following points should happen, however what you can do is inform HMRC right from the outset that your predicted earnings are likely to be X, you can do this via your personal tax account online.
    Quote Originally Posted by Heathmount View Post
    Company2. HMRC should issue an updated coding notice after month 1 based on estimated earnings.
    The first payment details will be sent via RTI (real time information) to HMRC once payment is processed, at this point it is more than likely HMRC will kick out a coding notice that predicts your earning for the year, however this is not always the case as HMRC may know other things about your tax affairs that will affect your tax code.
    Quote Originally Posted by Heathmount View Post
    Company3. HMRC should issue an updated coding notice once your earnings reach 100k.
    This can also happen if HMRC choose not to amend earlier.

    So in essence it is very much down to what HMRC submit to us, your safest way to do this is to give HMRC your predicted earnings and then they can amend the tax code from the outset to account for this, otherwise if you have fluctuations in your earnings (differing invoice amounts each mont) it will cause lots of coding notices being issued.

  5. #5

    Nervous Newbie


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    It's not really about the cost as I'll end up paying the same tax regardless of whether it's PAYE or SA. It's more about which umbrella company is right because if they can't get this question right then I probably don't trust them to get everything else right.

  6. #6

    Fingers like lightning


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    There is no right answer to it, as it is in the hands of HMRC and what they issue. As I said best route is to notify HMRC via your personal tax account and give them your predicted earnings for the year.

  7. #7

    Nervous Newbie


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    Thanks Lucy, your post came in at the same time I replied. Thanks for the really detailed response and getting in touch with HMRC seems like a good idea.

    I've just had the preferred supplier list through from the recruiter and Clarity aren't on them which is annoying. Just off the phone to them and they won't budge so sorry I can't go with you.

  8. #8

    Fingers like lightning


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    Quote Originally Posted by Heathmount View Post
    I've just had the preferred supplier list through from the recruiter and Clarity aren't on them which is annoying. Just off the phone to them and they won't budge so sorry I can't go with you.
    Not to worry Heathmount, I am used to that at the moment! Hopefully things will change soon and best of luck with it all!

  9. #9

    Nervous Newbie


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    Sorry Lucy, one last question seeing as you're here! Am I right in assuming that the 100K limit is once i've deducted pension contributions, Employers NI and umbrella margin?

  10. #10

    More time posting than coding


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    Don’t forget AL

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