Tax implications after returning my Company Car - confused about tax code changes from 566L to 844L

8 The way your tax codes are working is actually correct, but I understand the confusion! When you have a company car, HMRC reduces your tax-free personal allowance to account for the benefit-in-kind. The 566L code meant your tax-free allowance was reduced to £5,660 (the number before the L, multiplied by 10). Now with 844L, your allowance is £8,440, which is higher but still not at the full standard personal allowance (which would be around 1257L for the current tax year). The reason you're still seeing an £80 deduction is likely because there are other benefits or adjustments affecting your tax code besides just the company car. These could include health insurance, fuel benefit, or other taxable perks you receive. It could also be adjusting for tax you owe from previous years. The calculations you're doing assume that the only difference between your standard tax code and the reduced one was the company car, but there are probably other factors at play.

11 After dealing with similar company car tax headaches, I started using https://taxr.ai to make sense of my tax code changes. I was in almost the identical situation - handed back my company car mid-year and got confused by the new tax code that still seemed to be taking too much money. The tool analyzed my payslips and tax code notifications and explained exactly what was happening. In my case, I still had fuel benefit and company insurance that was affecting my tax code even after returning the car. It also highlighted that HMRC was collecting some underpaid tax from the previous year which I had completely forgotten about. It saved me hours of trying to decipher the HMRC website and waiting on hold with their helpline. Might be worth checking out if you're still confused about your situation.

4 I tried the taxr.ai service after seeing the recommendation here. Just wanted to report back that it was incredibly helpful for understanding my company car benefit situation! I uploaded my P11D and recent payslips showing my tax code change, and it provided a detailed breakdown of exactly how my tax code was calculated. What I learned was that when handing back a company car mid-year, HMRC doesn't just do a straight pro-rata calculation. They recalculate your entire tax position including all benefits and adjust your tax code accordingly for the remainder of the year. In my case, I was also still receiving a fuel card benefit which was continuing to reduce my tax-free allowance. The explanation matched what my employer's payroll team eventually told me, but I got the answer in minutes rather than the three days it took them to respond. Definitely recommend it if you're dealing with complex benefit changes.

14 If you're still not getting answers from HMRC about your tax code changes, I highly recommend using https://claimyr.com to get through to an actual human at HMRC quickly. I had a similar issue with my company car tax and spent weeks trying to get through to someone who could actually explain the calculation. Claimyr got me through to an HMRC agent in under 15 minutes when I'd been trying for days on my own. The agent was able to break down exactly how my tax code was calculated after returning my company car, and even spotted an error in how they'd calculated the benefit period. They adjusted my code right there on the phone and I got a refund of overpaid tax in my next paycheck. You can see how the service works here: https://youtu.be/_kiP6q8DX5c - basically it navigates the HMRC phone system for you and calls you back when it reaches an agent. Saved me hours of frustration.

19 I wanted to follow up about my experience with Claimyr after I expressed skepticism earlier. I was genuinely doubtful it would work for getting through to HMRC, but I was desperate after spending nearly 4 hours on hold over two days. I'm genuinely amazed - it actually worked exactly as promised. I got a call back in about 20 minutes connecting me directly to an HMRC agent who was able to explain my tax code situation in detail. Turns out there was an error in how they calculated my company car benefit after I returned it - they were still including a fuel benefit even though that ended when I returned the car. The agent corrected my tax code on the spot, and I'm getting a refund of around £240 in my next paycheck for the tax I overpaid. Would never have sorted this without actually speaking to someone at HMRC, and I doubt I would have gotten through without the service. Consider me a convert!

22 Something similar happened to me last year. Check if you also have a fuel benefit that might still be being taxed. When I handed back my company car, they removed the car benefit but forgot to remove the fuel benefit from my tax code. It took three calls to HMRC to get it sorted. Also, remember that tax codes are cumulative over the year. HMRC might be adjusting your code to ensure you pay the right total amount of tax for the entire year, not just from now onwards. That's why the math doesn't always seem straightforward when you do month-by-month calculations.

7 Has anyone else noticed that when you get a company car, your tax code drops immediately, but when you give it back, it takes forever for your code to fully adjust? Mine took almost 3 months to properly update after I handed back my BMW. Ended up having to call HMRC myself as the payroll team kept saying "it's in process" every time I asked. Finally got a decent tax rebate though!

This is a really common issue that catches a lot of people off guard! The key thing to understand is that your tax code changes aren't just about the company car - they're about your entire tax position for the year. When you had the 566L code, HMRC was collecting tax on your company car benefit plus any other taxable benefits you receive. Now with 844L, they've removed the car benefit but you're still being taxed on other benefits (like health insurance, life insurance, etc.) that you mentioned. The reason your monthly saving isn't the full £130 is because HMRC also uses tax code changes to collect any underpaid tax from earlier in the year or previous years. So part of that remaining £80 reduction might be catching up on tax you owe. I'd recommend calling HMRC directly to get a breakdown of your tax code - they can explain exactly what each adjustment represents. You can also check your personal tax account online at gov.uk which should show the components of your tax code calculation. Don't worry though - if you've overpaid tax due to the timing of returning the car, you should get that back either through your tax code or as a refund at the end of the tax year.

Just to add another perspective - I went through exactly this situation about 18 months ago. The confusion around tax codes after returning a company car is incredibly common, and you're definitely not alone in finding the calculations confusing. One thing that really helped me understand what was happening was requesting a "Notice of Coding" from HMRC, which breaks down every single adjustment they're making to your personal allowance. You can get this by calling them or through your online account. In my case, I discovered that besides the obvious things like health insurance, there was also a small adjustment for a season ticket loan I'd forgotten about, plus they were collecting about £180 in underpaid tax from the previous year where my company car benefit had been slightly underestimated. The system is designed to collect the right amount of tax over the full year, so when you make changes mid-year like returning a car, they have to adjust everything to make sure you end up paying exactly what you owe - no more, no less. It's actually quite clever once you understand it, but definitely not intuitive! If you do find there's an error in their calculations after getting the breakdown, don't hesitate to challenge it. I found one mistake in my coding and got a nice little refund as a result.

I've been through almost the exact same situation! When I returned my company car mid-year, I was also confused why my tax savings weren't as straightforward as I expected. What I learned is that HMRC operates on a year-to-date basis, so they're constantly adjusting your tax code to ensure you pay the correct total amount for the entire tax year. When you return a company car mid-year, they don't just remove that benefit going forward - they recalculate your entire tax position. A few things that might explain your £80 ongoing reduction: 1. Other taxable benefits you might have forgotten about (health insurance, life insurance, gym membership, etc.) 2. Previous year tax adjustments being collected through your current tax code 3. Student loan repayments if applicable 4. Pension contribution adjustments I'd strongly recommend logging into your Personal Tax Account on GOV.UK - it should show a breakdown of all the adjustments being made to your tax code. If that's not detailed enough, you can request a "Notice of Coding" from HMRC which gives you line-by-line explanations. Don't worry though - if there are any errors or if you've overpaid due to the timing of returning the car, it will all balance out by the end of the tax year, either through further code adjustments or a refund.

I can definitely relate to this confusion! I went through something very similar when I returned my company Volkswagen earlier this year. The tax code changes seemed to make no sense at first. What really helped me understand was realizing that HMRC doesn't just calculate your tax on what's happening right now - they're trying to make sure your total tax for the entire year is correct. So when you return the car mid-year, they have to do some complex calculations to balance everything out. In my case, the remaining reduction in my tax code after returning the car was due to: - Private medical insurance (which I'd forgotten was a taxable benefit) - A small amount of underpaid tax from the previous year - Dental insurance through work I'd definitely recommend checking your Personal Tax Account online first - it's much quicker than calling HMRC and gives you a good overview. If you need more detail, you can always call them later with specific questions. The good news is that even if the monthly amounts seem confusing now, it should all balance out correctly by the end of the tax year. HMRC's system is actually quite good at ensuring you pay exactly the right amount of tax overall, even if the month-to-month calculations aren't immediately obvious.

I've been dealing with a very similar situation! Just went through this exact scenario when I returned my company car in February. The tax code confusion is absolutely maddening when you're trying to figure out where your money is going. What really helped me was understanding that HMRC operates on a "cumulative" basis throughout the tax year. So when you return the car mid-year, they don't just adjust going forward - they recalculate your entire tax position from April 6th onwards to make sure you end up paying exactly the right amount for the full year. In your case, that £80 monthly reduction is likely a combination of: - Remaining taxable benefits (health insurance, life insurance, etc.) - Any previous year tax adjustments being collected - Possibly some year-to-date catch-up calculations I'd definitely recommend logging into your Personal Tax Account on GOV.UK first - it gives you a much clearer breakdown than trying to reverse-engineer the numbers from your payslip. You can see exactly what adjustments are being made and why. If you're still confused after checking online, calling HMRC directly is worth it. I know their phone lines are terrible, but once you get through, they can explain your specific tax code calculation line by line. In my case, they spotted that my employer had failed to notify them that my fuel benefit had ended with the car, so I was being overtaxed by about £30 per month. The good news is that even if there are timing issues or small errors, it all gets reconciled by the end of the tax year. You'll either get a refund or further adjustments to make sure you've paid exactly what you owe - no more, no less.