How to challenge a K-code
Newsletter issue – February 2023
The PAYE system should deduct approximately the right amount of tax from your salary so that you do not have further tax to pay on that income. However, it assumes that your income remains steady from year to year. This may not be the case.
If you have a PAYE code including the letter K, this means your personal allowance has been reduced to zero and a notional amount of income has been added to your salary to be taxed. The imposition of a K code will result in a significant amount of tax being deducted from your salary.
You may have been allocated a K-code because you had an unusually high amount of non-salary income (eg dividends) in the last completed tax year.
Many company owners/directors took large dividends from their companies in 2021/22 as they knew that the dividend tax rate would increase by 1.25 percentage points on 6 April 2022.
HMRC will have assumed that the same pattern of dividend payments would continue into 2022/23 and coded this high level of dividend into the PAYE code, resulting in a K-code.
If you plan to take more modest dividends in this tax year to 5 April 2023, you need to tell HMRC about your expected dividend income. This is easily done through your online personal tax account under the PAYE heading. This alternation should remove the K-code.
BLOG POSTS
Posted on Mon, 3 Aug 2015
Posted on Mon, 3 Aug 2015
Posted on Wed, 29 Jul 2015
TWITTER
Tweets by @OWSupportLATEST TAX TIPS AND NEWS
Cuts to National Insurance contributions and the abolition of so-called ‘non-dom’ tax breaks were among the headline announcements in the...
You‘ve probably digested the main news by now from the Spring Budget. Now comes the next stage: the Spring Finance Bill. The bill was published...
You may have seen somewhat of a furore breaking out in the media towards the end of the month, as HMRC announced its tax helpline would shut down for...
We‘ve seen plenty of speculation before the last two Budgets that Inheritance Tax would see major reforms. Yet nothing materialised. And the...
Funerals that are broadcast online for well-wishers unable to attend in person are becoming exempt from VAT. During the COVID pandemic, streaming...
Q: I’m a property owner, and I’m considering renting one of my houses out for people to use for vacations. What are the tax rules I need...
New tax year begins; new tax codes take effect....