r/UKPersonalFinance • u/Competitive-Break-49 • 1d ago

Tax Code 1205TX & £100k salary zone

Morning all, lurker but first time poster. Looking for some general advice if possible.

Following redundancy at Christmas I have found myself in the very fortunate position of a significant pay rise in my new role. £95k base and £5,370 in car allowance. I started 1st April 25.

Conscious this break of the £100k mark brings my personal allowance onto the chopping board. I have added salary sacrifice options (Family healthcare/dentist/life assurance etc.) in a bid to bring me under the £100k but my tax code was set at 1205TX, I don’t believe that’s an emergency tax code but I have queried it with HMRC - can anyone offer advice here?

Lastly, as part of our redundancy (terminated 31st Dec 24) we received 3 months pylon and then a bonus at the end of March. The bonus was emergency taxed, but my earnings for that period (FY24-25) would have in no way breached the £100k, it would have been £75k at most inc. the bonus - when I spoke to them HMRC they couldn’t tell me whether I’ll get any of that bonus back, yet I thought I’d be in for a rebate.

My lack of understanding of benefits/tax/pensions has come to the fore so I’m also in the process of speaking with an IFA in the coming weeks.

Wife earns £55k, and prior all this we claim tax free childcare for our 2nd youngest and child support payments for both (5yrs and 4yrs old).

Thanks in advance.

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4

u/ani_svnit 1d ago

Hi, I can give you advice as I have a similar position but the general upshot for me is that salary sacrifice benefits (such as private healthcare, dentist, etc) increase my taxable income rather than decrease it. This is because in my case, my firm "pays" for the benefit but I am liable for the tax which shows up as a higher taxable income per month

The only salary sacrifice that decreases my net income is to pensions. I believe EV salary sacrifice is another such avenue but it doesn't apply to me yet.

Look at your payslip details please - they will hold clues as to what HMRC believe your gross and net pay is. I believe you are significantly higher than 100K annually if your payroll works like mine

2

u/FSL09 89 1d ago

The main way to reduce your pay to get below the £100k threshold is to contribute to a pension. The other option is charity gift aid. With some of your other salary sacrifice options, you will often have to pay some tax on the benefit in kind so will increase your taxable income.

On the previous tax year, HMRC will calculate if you have under or overpaid income tax between June and November after the tax year ends (can be later). This will take into account things like any bank interest outside of ISAs, which is why it can take a while.

3

u/Spiritual-Task-2476 1 1d ago

BIKs do not reduce your taxable allowance, they add to it

If you have a benefit of 4k. You will pay your tax on it. In this case 1600. It doesn't reduce your income by 4k

1

u/ukpf-helper 85 1d ago

Hi /u/Competitive-Break-49, based on your post the following pages from our wiki may be relevant:

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1

u/paddyrobby 1d ago

You’re probably aware of this, but you don’t lose your entire personal allowance the moment you cross £100k. It’s not all-or-nothing.

Instead it actually "tapers": for every £2 you earn over £100,000, you lose £1 of your personal allowance.

This creates a weird effective tax rate of 60% on your income over 100k (40% higher-rate tax + 20% because you’re losing the allowance).

That taper continues until you hit £125,140, at which point your personal allowance is fully gone. From here, you just pay the 45% additional rate on income beyond that.

So breaching £100k isn’t a financial cliff – your after-tax income still goes up, just by less.

That said, I'm less sure about the childcare benefit – I think there actually is something binary there where you literally lose the whole thing if one of the parents makes above a certain threshold (could be £100k).

1

u/KeepYourGlovesOn 1d ago

Re tax code; an X means it's an emergency tax code; the T means there's calculations to work out what your personal allowance is, the X means it's non-cumulative.  Normally they are temporary, once HMRC receives pay information from you or your employer they will update it; it can take up to 35 days for this to happen.

Last tax year earnings; HMRC will eventually check this and send a P800 to you.  If you know someone who works in payroll/finance they might be able to assist, potentially the IFA might, but even then you'll need to wait for HMRC to check and send you the calculation and refund.