UK Tax Code Adjustment Effect on Higher Tax Bands

Question

If I owe money to the UK revenue, for say charges like HICBC (High Income Child Benefit Charge) or due to underpaid/owed tax in previous years, in some cases I can opt to have collected via a change in my tax code.

I live in Scotland, which has the following tax bands:

Band	Taxable income	Scottish tax rate
Personal Allowance	Up to £12,570	0%
Starter rate	£12,571 to £14,732	19%
Basic rate	£14,733 to £25,688	20%
Intermediate rate	£25,689 to £43,662	21%
Higher rate	£43,663 to £150,000	41%
Top rate over	£150,000	46%

https://www.gov.uk/scottish-income-tax

An adjustment to my tax code in this way will reduce my 'Personal Allowance'. So I will pay the 19% extra on the difference. E.g. If it's adjusted down by to £12,470, I will pay an extra £19 for the adjustment of that threshold.

My question is: When a tax band is adjusted in this way, do all the bands that you pay get revised down, i.e. are is the money reclaimed a combination of the difference at each threshold? E.g:

• 0% - £100 moves into 19% band.= £19
• 19% - £100 into 20% band = £1
• 20% - £100 into 21% band = £1
• 21% - £100 into 41% band = £20
• 41% - £100 into 46% band = £5

Or, to the latter bands remain fixed, and the claw bank is entirely from the reduction in your personal allowance?

Answer 1

Let’s say your allowance is reduced by £1000. That means that £1000 of your income that used to be tax free is now taxed at 41%.

There is £1000 less taxed at 0%. The amount of income taxed at 19, 20 or 21% stays the same. The amount of income taxed at 41% goes up by £1000, so you pay £410 more in taxes.

Answer 2

I think you-re over-complicating it. Your tax allowance is subtracted from your salary before the tax is calculated. For example, if you earn £40k, and have an allowance of £10k, then your taxable income is £30k. You then work out your tax according to the chart.

What that means is that if you stay within same tax band, then your change of tax up or down is all at the highest tax band you pay. Everything else stays the same.

If the change in allowance moves you do a different band, then some of the change is in the lower of the two bands and the rest is in the higher one.

Answer 3

I didn't really understand your bulletpoint-ed section, but

Or, [do] the latter bands remain fixed, and the claw [back] is entirely from the reduction in your personal allowance?

Yes, the band sizes remain fixed whatever your personal allowance. On https://www.gov.uk/income-tax-rates you can see

The table shows the tax rates you pay in each band if you have a standard Personal Allowance of £12,570.

(my emphasis), but also further down

You can also see the rates and bands without the Personal Allowance.

with a link which takes you to https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past#tax-rates-and-bands, where you can see it say

Tax is paid on the amount of taxable income remaining after the Personal Allowance has been deducted.

Again my emphasis. I imagine the majority of PAYE employees have the standard tax-free allowance, so the standard tables are what's usually quoted; but the taxable income, your income BEYOND your personal tax-free allowance, is what the actual tax is based on.