Explaining relation of tax adjustment to tax owed

Based on my self-assessment for 2022-23, I owe HMRC around £400. On my tax code for 2023-24, there is an adjustment (reduction) of around £3,500 in my tax-free amount - i.e. more than eight times what I owe. What's the relationship between the reduction amount and the tax owed amount? And why doesn't it seem to relate to tax rates of 20% or 40%?

Hi,

If an underpayment is being collected in your tax code then the restriction in your code is calcuted at your tax band to collect this back.

For example if underpaid £400 and a basic rate taxpayer at 20% the restriction to collect the underpayment would be 2000. 2000 at 20% = £400.

Thank you.

Thanks but, as noted, my tax code notice says I owe just over £400 and that my tax-free allowance has been reduced by just over £3,500. The amount owed is 12% of the tax-free allowance adjustment (reduction). Given that there is no 12% tax rate, how could this be - why isn't the restriction five times the amount owed (i.e. calculated at a 20% tax rate)? Any ideas?

Hi Richard,
We are sorry but we would need to access your record to review the code to see how the underpayment restriction has been calculated.
Details of how to contact HMRC here: 
Income Tax: general enquiries
Thank you.
 

I have the below showing in my HMRC, can someone explain what does this means please? We changed your tax code on 8 April 2024 Why your tax code has changed We changed this because: you now get Adjustment to rate band worth £1,236

Hi SARA Harrak,
If you have more than one PAYE source and between the sources you pay tax at the higher rate of tax, then an adjustment is made in the main tax code to collect the tax due at the higher rate.
If you want to review further you will need to contact HMRC to access/review your code:
Income Tax: general enquiries
Thank you.