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Underpaid Tax Letter
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# 1
magic747
Old 16-05-2012, 7:19 PM
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Default Underpaid Tax Letter

My husband received a letter in the post today from HMRC saying they have reviewed his income tax liability for the year 2010-11 and that he underpaid 1108.80, the reason being "more allowances were received than due".

This has come completely out of the blue and having never had anything like this before we are clueless as to how it's come about. Unfortunately (or probably stupidly on my part), we don't have any paperwork to check back on.

I'm not sure if it makes any difference but my husband was made redundant in September 2010 and after a few weeks unemployed, worked with another company until February 2011. He then worked with a couple of agencies until getting a permenant job in September 2011. When he left his job in the February, he never received a P45 so when he went to work with the agency, he had to complete a P46.

Is there any way I can check back to find out where it all went wrong, given that we don't have any paperwork? It's a bit frustrating that we've to pay this back now, especially if it's through no fault of our own, and I also dont quite understand what "more allowances were received than due" means.

Thanks in advance for any help, I find the whole "tax" thing REALLY confusing.
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# 2
Xutl
Old 16-05-2012, 7:35 PM
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Quote:
Originally Posted by magic747 View Post
My husband received a letter in the post today from HMRC saying they have reviewed his income tax liability for the year 2010-11 and that he underpaid 1108.80, the reason being "more allowances were received than due".

This has come completely out of the blue and having never had anything like this before we are clueless as to how it's come about. Unfortunately (or probably stupidly on my part), we don't have any paperwork to check back on.

I'm not sure if it makes any difference but my husband was made redundant in September 2010 and after a few weeks unemployed, worked with another company until February 2011. He then worked with a couple of agencies until getting a permenant job in September 2011. When he left his job in the February, he never received a P45 so when he went to work with the agency, he had to complete a P46.

Is there any way I can check back to find out where it all went wrong, given that we don't have any paperwork? It's a bit frustrating that we've to pay this back now, especially if it's through no fault of our own, and I also dont quite understand what "more allowances were received than due" means.

Thanks in advance for any help, I find the whole "tax" thing REALLY confusing.
Your husband can call HMRC and they will explain how the underpayment arose. If he's not good on the phone he can book an appointment at an Enquiry Centre for somebody to go through it with him face to face.

"more allowances were received than due" refers to his personal allowance. During 2010/11 he would have been entitled to 6475 free of tax (his personal allowance assuming he's under 65 years old). His employer would have been giving him this allowance via his tax code (647L) until he left in September. You can check this on the P45 he should have had.

It sounds like the agency did not use the P46 he filled in and instead also used tax code 647L. The code they used will have backdated to April. He'd have therefore had duplicate allowances (up to a possible 6475 x2 = 12950 free of tax), and paid insufficient tax as a result.

The agency would have given a P60 in April/May last year, you can check the code they used on that.

Of course all of the above is just my best guess. Hope it helps.

Last edited by Xutl; 16-05-2012 at 7:48 PM.
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# 3
amiehall
Old 16-05-2012, 7:38 PM
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It's easily possible he's underpaid tax when moving jobs like that without P45s being processed at every stage. I have found myself underpaying in the past due to the way I was paid so far in arrears. I continued to be paid for almost 2 months after leaving a job once and both jobs applied my personal allowance to this period causing an underpayment. If I was on a higher wage and did this a couple of times, I can see how a large underpayment can build up.

In terms of checking this is not an error, firstly he could ask his employers for a statement setting out his pay and tax paid. Any old payslips could also be useful. He could also ask HMRC for a statement of earnings and compare the sums shown to bank statements.
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# 4
magic747
Old 16-05-2012, 7:52 PM
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Thanks for your replies, it's certainly helping me to understand it a bit more. We have managed to find the P60 from the agency for that tax year and it says the final tax code is 647LW1. Anyone know what that means?
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# 5
RobertoMoir
Old 16-05-2012, 8:23 PM
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Quote:
Originally Posted by magic747 View Post
Thanks for your replies, it's certainly helping me to understand it a bit more. We have managed to find the P60 from the agency for that tax year and it says the final tax code is 647LW1. Anyone know what that means?
That they were using what's often called an "emergency tax code". You should read this.
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# 6
Xutl
Old 16-05-2012, 8:24 PM
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Quote:
Originally Posted by magic747 View Post
Thanks for your replies, it's certainly helping me to understand it a bit more. We have managed to find the P60 from the agency for that tax year and it says the final tax code is 647LW1. Anyone know what that means?
647L W1 means it was used on a non cumulative basis. So the tax code didn't backdate to April, it started from when the employment started (that's a good thing).

The only other thing I can think of is maybe your husband received a payment from the employer after he was made redundant where insufficient tax was deducted?

I think speaking to HMRC would be your best bet.
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# 7
jamesd
Old 16-05-2012, 8:30 PM
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647LW1 translates as 6470 personal allowance and on week 1/month 1 basis, which translates as the personal allowance split evenly among the months of the year. That should have reduced any underpayment of tax while he was with the agency so most of the problem probably happened before then. The agency looks to have got it as right as it could.

Might be a mistake by the company he worked with before the agency, the one that didn't provide a P45.
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# 8
magic747
Old 16-05-2012, 8:37 PM
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Yes he did get a redundancy payment so it is a possibility that insufficient tax was deducted, although I wouldn't have thought that would have been as much as 1108.

First of all though, we're gonna get in touch with HMRC to see if they can explain it a bit more.

Thanks again for your help, really appreciate it
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# 9
magic747
Old 16-05-2012, 8:40 PM
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Originally Posted by jamesd View Post
Might be a mistake by the company he worked with before the agency, the one that didn't provide a P45.
That's originally where I pointed the finger when I first read the letter! The employer was a bit of a 'cowboy' and, while I don't know if this is 100% true or not, we were told that other employees had issues with underpayment of tax in the past when working for him.
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# 10
magic747
Old 16-05-2012, 8:46 PM
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Also, my husband hasn't received a PAYE Coding Notice or anything to suggest that the underpayments are currently being taken from his wages. This weeks payslip is currently showing his tax code as being 819L. Is this right?
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# 11
jamesd
Old 16-05-2012, 8:59 PM
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It's OK for now, his employer will probably get a revised notice later. If it turns out that HMRC is wrong they might get another one after that to correct whatever was wrong.
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# 12
Mikeyorks
Old 16-05-2012, 9:46 PM
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Quote:
Originally Posted by magic747 View Post
This weeks payslip is currently showing his tax code as being 819L. Is this right?
The basic code for this year is 810L. The code you've quoted contains an extra 90 in personal allowances. Which suggests an extra allowance for laundering overalls / uniform?
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# 13
amiehall
Old 16-05-2012, 10:41 PM
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Quote:
Originally Posted by magic747 View Post
That's originally where I pointed the finger when I first read the letter! The employer was a bit of a 'cowboy' and, while I don't know if this is 100% true or not, we were told that other employees had issues with underpayment of tax in the past when working for him.
As I said before, it's possible that both employers were using this non-cumulative code for an overlapping period. Even if the period of work is not overlapping, payment in arrears can have this effect. In effect a double personal allowance is given for some pay periods. It's not anyone's "fault" as such as it's impossible for the employer to rectify without the P45 so they've done the best they can....

I would definitely ask HMRC to set out the amounts earned in each employment though and give them a sanity check. They do make mistakes with their records. I've had statements of earnings before with major errors and it's possible the employer has made a mistake reporting earnings to HMRC so do your best to check.
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