December 2022

Unless you already have a relationship with a financial planner, you might never have been asked this question. You might never have considered how it is you actually feel.

Money is emotional

Although money is often seen as a number crunching, rational, exercise, (we all know what we should be doing, on a basic level at least) our relationship with money is an emotional one, full of highs and lows. Have you ever felt down and used a quick spending spree as a ‘pick-you-up’, only to feel guilty for spending the money later?

How we feel about money can also be connected to our upbringing or our own environment, not to mention the wider world and the ‘financial crisis’, the ‘cost of living crisis’, the ‘energy crisis’. It might feel like we’re being fed more negative financial messages than positive ones at the moment.

Depending on how you were brought up, talking about money might feel like a taboo; talking about how much you have is rude and boastful, or maybe you have a sense of abundance but would like to see some evidence. Your money story may be that you should feel guilty for spending a lot of money on something, talking about how much you haven’t got, or asking for financial help, when perhaps your belief is that you should fix it yourself. Even if your own story isn’t negative, it can still be complicated.

Perhaps this generation-old difficult conditioning is why people often find it so hard to talk about money now, even from haggling for a better price, to discussing long-term money plans and wishes with family, both of which can lead to challenging your feelings or your understanding of your finances, for you or your immediate company.

How to talk about money

Just because the discussion might be hard or uncomfortable, it doesn’t pay to ignore the issues at hand. The key is to recognise and use those emotions to face the issue, and take action.

This could mean focusing on your goals and what you need to do to achieve them.

It may simply mean you have little idea what you are spending, even if you feel it’s affordable, and you want a better handle on things. The answer here might be setting out a budgeting and saving plan for your household. There are many budgeting apps and guides available, such as this one from StepChange.

Perhaps you want to put long term savings plans in place for specific goals, such as your children or grandchildren’s University fees or house deposits. You may have already saved efficiently over the years, but you’ve ended up with multiple accounts and you want to feel more in control overall. Do you have questions around arranging your estate more efficiently for the benefit of your heirs? These are all things a financial planner can help you with.

We ask our clients initially, and regularly, “in an ideal world, what would money mean to you?”. The answer usually includes “to not have to worry about it”. The answer isn’t ever in pounds and pence. It’s an emotional outcome.

Invitation

Interested in finding out how we can optimise your financial plan and investment strategy? Get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.

You can call us on 01869 331469

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).

HMRC issue tax codes automatically to your taxable income providers, whether this be an employer or a pension provider. Your code instructs your income provider how much tax to deduct from your pay.

The codes are reviewed each time tax legislation changes, you receive a ‘benefit in kind’ or your entitlement to tax allowances changes.

You’ll be used to seeing them on your payslips, and receiving notifications from HMRC that they have changed your code.

But what do the different codes actually mean?

We’ll summarise the mostly commonly seen tax codes here, however a full list can be found on the HMRC website.

The most common code is 1257L, and applies where the standard Personal Allowance of £12,570 (in 2022/23) is available. It’s used for most people who have only one job.

The letter relates to your situation. For example, L means you have the standard Personal Allowance and M means you’ve received a transfer of 10% of your partner’s Personal Allowance, N showing that you have transferred 10% of your Allowance to your partner.

BR shows that all the income from that source is taxed to Basic Rate, and NT means not taxed. WI, M1 or X shows that you are on emergency tax.

One that we often come across is K. This is referred to as a negative tax code. This shows that you have another source of income that isn’t taxed, and so that tax must be collected from other income through your K code. The number shows the amount of additional income that needs to be taxed, such as the State Pension, this is always paid gross, but is taxable.

For example, let’s say Mrs Smith receives State Pension of £15,570 each year. This is paid without deduction of tax.

Mrs Smith also has a work pension which pays her £4,000 a year. Her tax code here would be K300. This lets her pension provider know that they need to calculate the tax deduction for her work pension, on that pension (£4,000) plus an additional £3,000, so £7,000 in total. This would lead to an effective tax rate of 35% on this pension.

Mrs Smith also has a small annuity from her personal pension, and this has a BR tax code. Her pension provider will deduct Basic Rate tax from the full pension – her Personal Allowance and any adjustments have been taken care of on her State Pension and work pension.

How do I know my tax code is correct?

You can use the HMRC tax code page using your Government Gateway login. You can check the income that HMRC assume you will receive for the current tax year (you can also check the previous year). If you think the information isn’t correct, you can contact HMRC to ask them to update it.

Invitation

If you’d like to discuss taxation in context to your wider financial planning, get in touch today to arrange a free, no-commitment consultation with a member of our team here at WMM.

You can call us on 01869 331469

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxfordshire).