Tax codes, PAYE, and salary

[Brigadier]

Morning all,

Had to contact HMRC this week, as for reasons unclear, I have been put on a w1m1 tax code (as well as the code itself reducing, for an underpayment; again, reasons unclear).
However, that is not the reason for my post; it is more to do with how they calculate the tax code, and whether salary per se has any bearing on one's tax code.

I am PAYE, with salary (and occasional, irregular, and variable overtime additions).

I have a company car, which has not changed for 3 years. Clearly, this is a benefit in kind, and affects my tax code. I presume?

I also presume that my tax code is entirely unrelated to my salary; again, is this correct and, if not, I would appreciate an explanation as to why.

The HMRC lady was very insistent that I declare a guesstimated annual salary, "so that she could put me on the correct tax code".
I really don't understand this part, as I thought that the tax code was entirely dependent on any benefits in kind (or absence of)?

Any clarity (not links to HMRC websites; they just confuse me even more!) would be very much appreciated

 

[Iamchamps]

The only one I can answer to is regarding the company car if it is business only and you are not allowed to use for personal use it will have no effect on tax code. If you use it for business and personal then it will have an effect on your tax.

 

[Brigadier]

Business and private use, so I acknowledge that it affects my tax code.

I just don't get how salary affects tax code: surely, benefits in mind affect the tax code, which then affects the points at which the various tax rates hit you?

 

[SirGalahad]

https://www.gov.uk/guidance/salary-sacrifice-and-the-effects-on-paye

 

[Doggit]

A tax code is used by your company to determine the amount of tax that your company decucts from the salary it pays you, and has nothing whatsoever to do with how much you earn, so the person you spoke to is either talking at cross purposes, or one of you doesn't understand the situation - but her I suspect.

I suspect you've been put on a W1M1 code, so that will handle the irregular payments, but it should still work itself out okay, but this could explain why she wanted a guestimate of your base salary. They'd then know the base line for you, and you'd then get taxed at 20% on everything over the base figure, with the taxable allowance spread over the year.

The most standard tax code is 1150L, and this means you pay no tax on the fist £11500 of your salary, and they'd dived the 1150 by 12, and then calculate the tax on how much you earn each month, so I can't see why they are using the W1M1 code, as it's effectively the same. Obviously, the standard code is then reduced by the benefit in kind that you receive from the company car, but that still shouldn't make a difference. And if you've underpaid in previous years, then it would get reduced further to recover the underpayment, but agin, this shouldn't present a problem.


Here's a quick description of the W1M1 tax code, and that may help you shed light on the issue, but