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Tony Tax
Tony Tax, Tax Consultant
Category: UK Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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What is tax code K17 M1? Is it the right tax code for an employee

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What is tax code K17 M1? Is it the right tax code for an employee with additional rental income?
Hi.

Tax code K17 M1 means that the deductions in your tax code exceed your personal allowances by £170 so you are taxed on £170, in addition to your salary. The M1 part means that each month is taxed in isolation so that any underpayment that has accrued prior to the issue of this code will not be accounted for until the end of the tax year. This is to avoid any large underpayment that may have accrued being taken from your salary in one go.

You don't have to have the tax collected on rental income through your tax code but if it is accurate you won't owe any tax on rental income at the end of the tax year. If you would rather pay the tax on rental income separately, call the tax office and have the rental income figure removed.

Let me know if you have any queries.
Customer: replied 5 years ago.
Thank you, XXXXX XXXXX very helpful. I just have one question. For the tax year April 2010-11 I have just paid a cheque separately from my PAYE income . I have now been changed to a different tax code for 2011-12 - the K17M1, which is reducing my monthly salary through my PAYE code. When I submit my accounts for the flat rental at the end of this year (for 2011-12, can I assume I will have already paid the additional tax through it being deducted from my PAYE and I will not have a separate additional cheque as I do this year?
You will have paid something towards it through your PAYE but whether that will cover the whole liability or not depends on the rental profit. It will certainly help you to avoid having a larger payment on account to make, if you have one at all.

The rule for payments on account is that if at least 80% of your overall tax liability for a tax year is collected by deduction at source, PAYE in your case, then you will have no payments on account to make for the next year any any extra tax for that year will be payable on the following 31 January.
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