To get the best out of TaxCalc you need to make sure that you have all the personal information to hand that you need to complete your tax return.
- End of year tax forms – P60, P11D, P9D, P810
- P60
- P2
- Employee end of year tax forms - P11D or P9D
- P810
- P45
- Business & Partnership Information
- Benefits Information
- Investment Information
- Understanding your tax code
- If your tax code is a number followed by a letter
- If your tax code is a 'K' followed by a number
- Common tax code letters and what they mean
- Other tax codes
- How tax codes are worked out
- How the 'K code' works
- Where to find your tax code
- Changes that might affect your tax code
End of year tax forms – P60, P11D, P9D, P810
At the end of the tax year you’ll get certain forms from your employer, pension payer and your tax office. The forms obviously depend on the types of pension you are receiving (if any), whether or not you are still working and the amount of your overall income.
P60 : Confirming your tax code
At the end of the tax year you’ll receive a form P60 from your Employer or company pension payer, or both. The P60 confirms your final tax code for the year and gives details (for the year that has just ended) of:
- Income from your employment
- Income from your pension
- Tax that has been deducted
- National Insurance contributions that have been paid by you and your employer. (You shouldn’t be paying any if you’ve reached state pension age)
- Your final tax code
Depending on whether or not you’re still working or looking for work, it may also include:
- contributions to your employer’s pension scheme
- your pay, and the tax taken off it, from any previous jobs
- any Jobseeker’s Allowance you received in the same tax year
Your pension payer or employer gives the information on the P60 to your tax office also.
It’s important to check that the tax code on the P60 is the same as the last ‘P2 Coding Notice’ your tax office sent you and that the other figures on it look right.
P2 ‘PAYE Coding Notice’ for the 2006/2007 and 2007/2008 taxation years
Your P2 ‘PAYE Coding Notice’ tells you what your tax code is and how it’s worked out. The tax code is sent to your pension payer or employer. The code number tells them what tax-free income you’re entitled to (if any) over the tax year and, as a result, how much tax to take off your overall income before they pay you. This system of collecting tax is called PAYE (Pay As You Earn).
You will also need any ‘Statements of Account from HMRC’
Employee end of year tax forms P11D or P9D
If you earn £8,500 or more
If you’re employed and earned £8,500 or more, your employer should give you a copy of Form P11D after the end of the tax year (5 April) and at latest by 6 July. Your employer uses Form P11D to tell your tax office about the value of any ‘benefits in kind’ they’ve given you during the tax year. This means benefits or expenses that effectively increase your income, like:
- a company car
- private medical insurance
- interest-free loans
The items listed on your P11D should also appear on your last P2 coding notice (This is sent to you at the start of the year, and sometimes part-way through if something changes. It confirms the allowances and deductions you’re getting). You’ll need the P11D if you have to fill in a tax return.
(If you start getting benefits in kind part-way through the tax year it’s a good idea to tell your tax office. That way they can adjust your tax code right away instead of at the end of the year, which is when your employer tells them, by which time you may owe extra tax.)
If you earned less than £8,500 in the last tax year and received any benefits in kind you’ll get Form P9D listing these, however your employer doesn’t need to report them to your tax office so they won’t appear on your P2 coding notice.
Tax review form P810
Your tax office may send you a one page Form P810 ‘Tax review for the year ended 5 April’. This is used to check that your tax code is still correct. If you receive a P810 remember to complete and return it as soon as you can. Or you can call the number on the form and give the information over the telephone.
If the information you provide shows that you’re paying the wrong amount of tax your tax code can be adjusted right away which will prevent a build up of over- or underpayments.
P45 – Details of an Employee leaving work
When you leave the employment of a company your will be given your P45 – to complete this year’s tax return you need to have access to all P45 forms for all the other jobs you had in the tax year ending April 5th 2007.
Business & Partnership Information
- If you are Self Employed, you will need accounts for your business or your records of income and expenditure.
- If you are a Partner then you will need a copy of your partnership statement (from the partnership return) showing your share of the partnership's profits or losses.
Benefits Information
- You will need forms P45U or P60U in respect of any incapacity benefit or job-seeker's allowance.
- Amount of state pension received.
- P60 forms for any occupational pension.
Investment Information
- Details of any share options you exercised during the year.
- Tax vouchers for dividend income.
- Bank statements or summaries showing interest earned.
- Record of payments into a personal pension (such as a pension certificate or Free Standing Additional Voluntary Contribution, or FSAVC, certificate)
- Details of the cost, proceeds and expenses for any asset sold.
- Occasionally we update the program to add new features or to incorporate any HMRC changes. 'TaxCalc update enabled' is the default setting within the 'Settings' menu and will check for any available updates when you are on line.
- On the 'Start Screen', you can 'create' a new return or start by 'importing' the data from last years return.
Understanding your tax code
A tax code is used by your employer or pension provider to calculate the amount of tax to deduct from your pay or pension. If you have the wrong tax code you could end up paying too much or too little tax.
What is a tax code?
A tax code is usually made up of one letter and several numbers, for example: 117L or K497.
If your tax code is a number followed by a letter
- If you multiply the number in your tax code by 10, you'll get the total amount of income you can earn in a year before paying tax
- The letter shows how the number should be adjusted following any changes to allowances announced by the Chancellor - common tax code letters are explained below.
If your tax code is a 'K' followed by a number
If your tax code is a 'K' code - for example, K497 - the number indicates how much must be added to your taxable income.
Common tax code letters and what they mean
L - is used if you are eligible for the basic personal allowance.
P - is used if you are aged 65 to 74 and eligible for the full personal allowance.
V - is used if you are aged 65 to 74, eligible for the full personal allowance and the full married couple's allowance (for those born before 6 April 1935 and aged under 75) and estimated to be liable at the basic rate of tax.
Y - is used if you are aged 75 or over and eligible for the full personal allowance.
T - is used if there are any other items HM Revenue & Customs (HMRC) needs to review in your tax code, or if you ask HMRC not to use any of the other tax code letters listed above.
K - is used when your total allowances are less than your total 'deductions' (read more under 'How the K code works').
Other tax codes
If your tax code has two letters but no number, or is the letter 'D' followed by a zero, it normally indicates that you have two or more sources of income and that all of your allowances have been applied to the tax code and income from your main job.
BR - is used when all your income is taxed at the basic rate - currently 22 per cent (most commonly used for a second job).
D0 - is used when all your income is taxed at the higher rate of tax - currently 40 per cent (most commonly used for a second job).
NT - is used when no tax is to be taken from your income or pension.
(If you have two jobs, it is likely that all of your second income will be taxed at the basic or higher rate - depending on how much you earn. This is because all of your allowances will have been used against the income from your main job.)
How tax codes are worked out
Step 1
Your tax allowances are added up (in most cases this will just be your personal allowance and any blind person's allowance, in some cases it may include certain job expenses).
Step 2
Income you've not paid tax on (for example untaxed interest or part-time earnings) and any taxable employment benefits are added up.
Step 3
The total amount of income you've not paid any tax on (called 'deductions') is taken away from the total amount of tax allowances. The amount you are left with is the total of tax-free income you are allowed in a year.
Step 4
To arrive at your tax code the amount of tax-free income you are left with is divided by 10 and added to the letter which fits your circumstances.
Example:
The tax code 117L means:
- you are entitled to the basic personal allowance
- £1,170 must be taken away from your total taxable income
How the 'K code' works
If your deductions (untaxed income on which tax is still due) are more than your allowances you'll be given a K code, to ensure you pay tax on the excess.
The excess tax due is divided by 10 and added to the letter K. So, whereas with other tax codes the number indicates the amount of income you can have tax-free, the number in a K code indicates how much must be added to your taxable income.
K code example
K497 means:
- your untaxed income was £4,970 greater than your tax-free allowances
- as a result, £4,970 must be added to your total taxable income to ensure the right amount of tax is collected.
Where to find your tax code
If you're unemployed or between jobs
Your tax code is written on your P45 (given to you by your employer when you stop working for them). This is why it's very important to give this to your new employer when you change jobs.
If you've lost your P45 and want to find out your tax code contact your tax office and give them your National Insurance number and tax reference number.
If you're starting your first job
If you're starting your first job and don't have a P45, your employer will give you a P46 to fill in and sign. Your employer will allocate a tax code and work out the tax due. We will process your P46 and, where necessary, revise your tax code.
If you've paid too much tax, your employer will make the necessary repayment. If the tax year has ended before this is worked out, then HMRC will make the repayment. If you haven't paid enough tax your tax code can be amended to collect the underpaid tax.
If you get a company or personal pension
You'll find your tax code on your 'notice of coding' sent to you by your tax office after the start of each tax year (and at other times if your tax code changes). You'll also find your tax code on notices and pay slips from you pension provider.
Changes that might affect your tax code
You must keep HMRC informed of any change in your circumstances, for example if:
- you get married, form a civil partnership or separate and either of you was born before 6 April 1935
- you start to receive a second income
- the amount of untaxed income you get increases or reduces
If you do not do this you could end up paying the wrong amount of tax.
If HMRC changes your tax code, you should receive a ‘notice of coding’ from your tax office. Keep all notice of coding letters for reference in case you have any questions or need to check you are paying the right level of tax.
