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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

Aibu to not think this is right? Tax related.

55 replies

DisappointedMe · 10/04/2015 11:24

I've name changed for this thread.

My DH had a big bonus in feb of this year, and it has taken him over the personal allowance threshold.

So we've since received a letter from HMRC basically changing his tax code, based on the last tax year's earnings, removing the personal allowance entirely.

His basic salary is just under the point where you begin to lose the personal allowance. And bonuses are not guaranteed.

So I've calculated that his pay from this month will drop by over £350/£400. It's going to be a real problem to shift money around to accommodate this loss.

I know as a family we are fortunate, but I thought that by the end of the tax year adjustments are made accordingly?

OP posts:
JellyM · 10/04/2015 11:34

Just phone up hmrc and explain that and I'm sure they will adjust the code back again. Just agree to do self assessment to capture any tax owing and changes to income

Indantherene · 10/04/2015 11:36

Well they have made adjustments accordingly. They are assuming that his salary is now above the limit. If it isn't going to be for this year, all he has to do is phone them and ask for it to be put back.

Original poster
DisappointedMe · 10/04/2015 11:37

Thanks Jellym, i wasn't sure if this was correct or not.

He already does a self assessment as we have a rental property.

OP posts:
TywysogesGymraeg · 10/04/2015 11:42

You only pay higher rate of tax on earnings above the threshold. So takehome shouldn't be less if you earn more.

Everything you earn up to 10,600 is tax free.
Everything you earn between 10.6k and 31,785 is taxed at 20%.
Everything you earn between 31,786 and 150,000 is taxed at 40%.
Everything you earn over 150k is taxed at 45%.

Are you saying he doesn't usually earn more than 10.6k? As this is what is meant by "personal allowance".

The tax people are usually pretty helpful, and will be able to advise.

Original poster
DisappointedMe · 10/04/2015 11:57

TywysogesGymraeg - that's what we thought.

But once you begin to earn over 100k, the personal allowance tapers off. So for every £2 you earn you lose £1 in personal allowance. So once you reach £120k you've lost your personal allowance completely.

The bonus he received took him over this point, so he paid 40% tax and then the personal allowance tax amount in addition to this.

OP posts:
TywysogesGymraeg · 10/04/2015 12:11

Sorry Disappointed - I've lost all interst now I know he earns in excess of 120k pa!!! It's more than I'd ever dream of earning, even with your extra tax. Envy

gamerchick · 10/04/2015 12:17

Just ring them up. The best time is early morning and they're really nice and helpful. It's just getting through that's the pain.

DisappointedOne · 10/04/2015 12:31

So he brings home £6k per month net and you're going to struggle to cover £400? Hmm

ragged · 10/04/2015 12:31

Your husband is in a fortunate position and I'm sure he's clever enough to juggle his finances and make this situation tax efficient.

Original poster
DisappointedMe · 10/04/2015 12:39

He doesn't bring home that figure at all, Disappointed.

I'm a sahm, and we have dc. I'd applaud anyone that doesn't think £400 a month is not a significant amount.

OP posts:
BolshierAyraStark · 10/04/2015 12:41

Amazing that someone smart enough to earn over £100k can't figure out that a simple phone call to HMRC could sort this issue...

intlmanofmystery · 10/04/2015 12:43

Sorry OP, you are caught in the most punitive tax band. Tax authorities predict that your future income will be the same as your previous year so if your husband had a bonus which took him above the threshold then they will assume that it will continue as such. Feel free to argue the "bonuses are not guaranteed" with HMRC however if your husband receives a pay rise or a similar bonus next year then you will be in the same situation and his tax code is correct. But always worth having the conversation. I have to "discuss" issues with them every year!

Oh, and ignore the comments made out jealousy. Way too much of it on MN.

SuggestmeaUsername · 10/04/2015 12:44

what have they changed his tax code from and to?

Lifeisadancefloor · 10/04/2015 12:44

Disappointed, my DH is the same (TBH we didn't know about the loss of personal allowance - but we were ignorant).

He needs to put in his Self Assessment and pay any extra tax that is owing -my Dh paid an extra 2k this year.

There are things that the company can do - pay the bonus in two lumps - so a big bonus doesn't fall just in the one tax year, some could be put in shares (if you have that option), some can be put in pension (I think!).

But mainly you just have to suck it up and move the money around to compensate - as I said it happened to us about 2/3 years ago and had the same impact on our budget but we managed to work it out and you will too!
Good Luck

TywysogesGymraeg · 10/04/2015 12:49

Better than calling the tax office, would be to get a good accountant who could help you stash it all off shore or something!

Could the rented property be put in your name if you don't earn anything else. That would be less income for DH, and tax free income for the marriage, if you don't get more than 10.6k in rental.

I don't know why I'm helping someone who's before tax income is 4x mine though

DisappointedOne · 10/04/2015 12:50

Only way he'd be bringing less home is if he had perks (private healthcare, company car) or making pension conts. Even so, your budget can't be that tight.

stillstandingatthebusstop · 10/04/2015 12:51

Disappointed we are in exactly the same position. Hmm Confused. My DH hasn't been able to get through to HMRC on the phone to discuss new tax code.

19lottie82 · 10/04/2015 12:52

Just a word of warning. HMRC are USELESS, you will more than likely be passed from department to department ,speak to a different person every time and be given utterly contradictory information.

MAKE SURE that EVERY TIME you speak to someone write to someone or receive a reply from someone, you keep a note of who it was, the date and what was said.

19lottie82 · 10/04/2015 12:53

disappointedone how can you comment if the OP's budget is tight or not/ all you have seen is a snapshot of the household income, not the outgoings. you're not really in a position to comment.

DisappointedOne · 10/04/2015 12:56

Nobody is forced to have high outgoings though. DH and I have earned similar in the past, while living in central london and struggled to spend it all. Finding £400 per month for someone earning in excess of £120k per year shouldn't be that hard. Perhaps only eat lobster once a week and switch champers for water occasionally. Wink

Original poster
DisappointedMe · 10/04/2015 12:57

Thanks for the replies.

He isn't great when it comes to tax, and neither am I. He was planning on calling them, but our accountant is away for easter and before they went said the tax code was correct as based on last year's earnings.

Why the negative undertones?

He is very career driven and naturally good at his job.

He probably realises his lucky more than most. He grew up in care, was abused, his mother died of cancer when he was 5 (why he went into care) was thrown out at 16. Borrowed money for a suit for an interview, as didn't go to university. And just worked his way up different roles.

He even spends time volunteering as a mentor for disadvantaged children, who are in a similar situation that he was.

OP posts:
OTheHugeManatee · 10/04/2015 12:57

The marginal rate between 100k and 150k is savage, something like 60% in practice. Call HMRC and chase this up. Also consider upping pension contribs to take earnings back below the threshold.

19lottie82 · 10/04/2015 13:00

DH and I have earned similar in the past, while living in central london and struggled to spend it all

good for you.

again, you're being extremely judgemental, when you don't know anything about the OP's outgoings. You don't know how much their mortgage is, you don't know how many kids they have, you don't know if they have any debt...... I could go on (and on) but I won't.

DisappointedOne · 10/04/2015 13:00

Assuming no taxable benefits or pension contributions, take home pay should be as follows (approx):

£100k = £5,500 per month
£120k = £6,000 per month
£150k = £7,500 per month

TranmereRover · 10/04/2015 13:01

why anyone feels that they should have to justify earning a good salary by referring to a troubled private life is beyond me. he works hard, he earns a lot.
However them's the breaks with tax - you earn a lot, you pay more. They adjust your tax code on teh assumption that you get a similar bonus next year which also removes your personal allowance, and so that you don't get hit with a large tax bill when you do next year's return. If he geniunely isn't likely to get another bonus like that, he'll need to call them and get his code adjusted back, but your calculations are wrong anyway - losing the personal allowance makes about £50 / month difference. Are they simultaneously putting him on 45% as well? does the rental income plus bonus take some earnings over £150k?