Understanding Your K Tax Code with Ultra Tax Ltd
A tax code is crucial for informing your employer how much tax to deduct from your wages. Particularly important if you have multiple PAYE jobs, keeping up-to-date with tax code changes ensures accurate deductions in the income tax you pay each tax year.
If you find yourself assigned a K tax code, this indicates that you have untaxed earnings exceeding your Personal Allowance. Here are a few reasons you might receive a K tax code:
You may still owe tax from a previous tax year.
You might be receiving state or employer benefits that are taxable.
Example of PAYE on Tax Code K
Suppose you’re entitled to the standard Personal Allowance of £12,570, but you have additional tax to pay from either unpaid tax from the previous tax year or taxable benefits. This scenario would typically result in a tax code like K243, effectively increasing your taxable income by £2,430 (the excess over your Personal Allowance). This means your employer will calculate the Income Tax as if you earn more, hence the term 'K tax code', which acts as a negative Personal Allowance.
Despite the challenges a K tax code may present, there are protective measures in place: you cannot be taxed more than half of your gross income under this code.
How to Address Issues with Your K Tax Code
HMRC updates your tax code as your financial circumstances change. However, mistakes can occur, particularly if tax codes from the previous tax year are incorrectly carried over. It’s essential to resolve any incorrect assignments swiftly.
At Ultra Tax Ltd, we review and rectify discrepancies in your tax code as part of our service. If we find that you owe tax or are due a refund, we’ll ensure your tax code reflects the correct information.
Could You Be Eligible for a Tax Rebate?
Being on the wrong tax code, such as a K tax code when not applicable, might lead you to overpay tax. This often occurs when changing jobs, if Marriage Allowance isn’t applied correctly, or when adjustments for previous deductions aren’t accurately reflected. If you find yourself overpaying tax due to tax code errors, you could be eligible for a tax rebate.
Contact Ultra Tax Ltd today to assess your situation. We're dedicated to helping our clients understand tax codes explained, ensuring you only pay the tax you legitimately owe and helping you reclaim any overpayments efficiently.