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  • FIRST POST
    • polymaff
    • By polymaff 3rd Jan 18, 5:19 PM
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    polymaff
    Taxed before you've got it.
    • #1
    • 3rd Jan 18, 5:19 PM
    Taxed before you've got it. 3rd Jan 18 at 5:19 PM
    I know that plenty of threads have been down to a misunderstanding of Payments on Account - but:

    Has anyone seen the new P2 - introduced by HMRC late in November? This jacks up your tax code in an attempt to get their estimate of your tax liability for 2017/18 paid by 5th April 2018.

    "6 April 2017 to 5 April 2018

    We think you’ve paid too little Income Tax this year and owe
    £xxxx. We’ll start to collect this straight away.

    We’ll collect £xxxx from your taxable income before 5
    April 2018. To do this, we’ve reduced the tax-free allowance
    in your tax code by £xxxxx to collect this in equal
    amounts."


    What they are taxing is estimated savings interest - but they are trying to collect it on a regular, PAYE-style, basis. Problem is that savings interest is not regular, PAYE-style, income. Some of it I will not have until very near the end of the tax year.

    So is this an attempt to tighten the screw way further than under Payments on Account?

    Incidentally, I went online on receiving this P2 (dated 20th December 2017) this afternoon. It turns out that that P2 has already been overtaken by a new P2 that demands even more tax-in-advance!

    Plus the same Payments on Account they wanted before they made these new demands.

    Huh! Any thoughts?
Page 1
    • Dazed and confused
    • By Dazed and confused 3rd Jan 18, 7:06 PM
    • 2,090 Posts
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    Dazed and confused
    • #2
    • 3rd Jan 18, 7:06 PM
    • #2
    • 3rd Jan 18, 7:06 PM
    polymaff


    Incidentally, I went online on receiving this P2 (dated 20th December 2017) this afternoon. It turns out that that P2 has already been overtaken by a new P2 that demands even more tax-in-advance!


    Are you sure about this? There was a longish thread about a similar thing a while back and I think what had happened was that it was just the adjustment to the tax code which had changed, not the amount of tax. Basically by the time you looked at the code online there was a shorter period for £x.xx to be collected over so the adjustment needed to be higher.

    It was all immaterial though as the poster wasn't actually getting new tax codes sent out, they were just showing up on their personal account, not being sent to her employer.

    If you check again today the adjustment will probably have changed again!
    • gt94sss2
    • By gt94sss2 3rd Jan 18, 7:33 PM
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    gt94sss2
    • #3
    • 3rd Jan 18, 7:33 PM
    • #3
    • 3rd Jan 18, 7:33 PM
    If you file a self assessment form, you can stop HMRC taking any tax owed via PAYE by ticking the two boxes under the "If you have not paid enough tax" section on page TR6 of the paper return.

    No doubt the online version has similar options.
    • polymaff
    • By polymaff 3rd Jan 18, 8:13 PM
    • 1,852 Posts
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    polymaff
    • #4
    • 3rd Jan 18, 8:13 PM
    • #4
    • 3rd Jan 18, 8:13 PM
    Are you sure about this?.
    Originally posted by Dazed and confused
    I'm sure about the quote - which seems to make it clear that by the end of this tax year HMRC will have, via re-coding, taken an extra, significant, sum from a PAYE-based occupational pension of mine.

    This year - for me - has been rather like 2016/17 so the HMRC PoA estimates for 2017/18, based upon 2016/17 are pretty-well right. Thus the first 50% they want by 31st January as a Payment-on-Account for 2017/18 is acceptable - but this other in-year tax-grab of over 50% more is not acceptable - and there's no sign of them cancelling the July 31st demand for the second 50% PoA - yet.

    This is the latest evidence I've seen of HMRC trying to get more and more money out of taxpayers before they've actually received it

    Again, anyone else with experience and/or comments?
    Last edited by polymaff; 03-01-2018 at 8:20 PM.
    • polymaff
    • By polymaff 3rd Jan 18, 8:38 PM
    • 1,852 Posts
    • 798 Thanks
    polymaff
    • #5
    • 3rd Jan 18, 8:38 PM
    • #5
    • 3rd Jan 18, 8:38 PM
    If you file a self assessment form, you can stop HMRC taking any tax owed via PAYE by ticking the two boxes under the "If you have not paid enough tax" section on page TR6 of the paper return.
    Originally posted by gt94sss2
    Actually, I'm happy for them to do this - but not then try to also collect 100% of the liability via PoA.
    • madgagoo
    • By madgagoo 3rd Jan 18, 8:40 PM
    • 345 Posts
    • 173 Thanks
    madgagoo
    • #6
    • 3rd Jan 18, 8:40 PM
    • #6
    • 3rd Jan 18, 8:40 PM
    Yes, have seen this on some of my clients. Horrifically too high as well!

    There is no statutory right for HMRC to do this (I certainly couldn’t find anything anyway) so I asked them to remove the estimated underpayment from the code. They agreed.
    • polymaff
    • By polymaff 4th Jan 18, 9:41 AM
    • 1,852 Posts
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    polymaff
    • #7
    • 4th Jan 18, 9:41 AM
    • #7
    • 4th Jan 18, 9:41 AM
    Yes, have seen this on some of my clients. Horrifically too high as well!

    There is no statutory right for HMRC to do this (I certainly couldn’t find anything anyway) so I asked them to remove the estimated underpayment from the code. They agreed.
    Originally posted by madgagoo
    Yes. That's what I've done in the past - on the basis that there was no legislation, yet. This is the first time I've seen it in combination with PoA. As you say, the figures are horrific.

    I'd guess that this will happen more often with interest now paid gross.

    Another "treat" from HMRC
    • badmemory
    • By badmemory 4th Jan 18, 6:11 PM
    • 1,221 Posts
    • 1,329 Thanks
    badmemory
    • #8
    • 4th Jan 18, 6:11 PM
    • #8
    • 4th Jan 18, 6:11 PM
    There was a thread on here a few weeks ago about the codes generated in your personal tax account & they do indeed (according to that thread) change every single day but only send a new code once a month to employers. The reason it appears to happen is that the further you get into a month the more tax you owe so the code changes. This doesn't seem to affect you if only have PAYE income.

    There was another thread about tax due on interest payments, HMRC seemed to think that you would earn more than double for the current tax year. This was after the bank rate had gone down and before it went up again. Their's must be a nice world to live in. We are all going to have to check their figures VERY carefully.
    • Dazed and confused
    • By Dazed and confused 4th Jan 18, 7:58 PM
    • 2,090 Posts
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    Dazed and confused
    • #9
    • 4th Jan 18, 7:58 PM
    • #9
    • 4th Jan 18, 7:58 PM
    The reason it appears to happen is that the further you get into a month the more tax you owe so the code changes. This doesn't seem to affect you if only have PAYE income.

    I don't think it's that you owe more tax, it's just that there is less time to collect the tax so the alteration to the tax code has a bigger impact.

    To use polymaff's dates (amounts are realistic just for illustration)

    20 Dec 2017 estimated underpayment £200.00 needs to be collected over remaining 16 weeks of the year so tax free allowances are reduced by £3250 to collect this

    03 Jan2018 estimated underpayment is still £200 but there is only 14 weeks of the year remaining so if a new tax code was issued the tax free allowances would have to be reduced by £3715 to collect this.

    And I think this does apply to PAYE income only, sure the poster I remember from a few months ago was all about her partner's company car.
    • badmemory
    • By badmemory 5th Jan 18, 1:01 AM
    • 1,221 Posts
    • 1,329 Thanks
    badmemory
    The reason it appears to happen is that the further you get into a month the more tax you owe so the code changes. This doesn't seem to affect you if only have PAYE income.

    I don't think it's that you owe more tax, it's just that there is less time to collect the tax so the alteration to the tax code has a bigger impact.

    Originally posted by Dazed and confused
    Sorry this is exactly what i meant, the further you get into the month without the tax being paid the more you owe. So if you owe £1 after 1 day into the month then by the time you get to day 30 into the month you owe £30 unless you were paid on day 29 then you just owe £1 again. However, it could be that if your employer isn't reporting as promptly as they should, you could land up with a new & definitely less favourable tax code.

    If you have extra earnings/benefits such as a car & your employer is not reporting the real time earnings as promptly as they should it could cause real problems. We all, of course, know that none of our employers would make this sort of mistake don't we? Yeah really!
    • dori2o
    • By dori2o 5th Jan 18, 7:54 AM
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    dori2o
    What I see here is people looking to make a mou tain out of a mole hill.

    If you dont want your interest included in the tax code then simply go online to the personal tax account, update your current year estimated interest figure to something more accurate, or even £0 to have it removed from the code entirely. With the latter option you'd simply have to pay the tax due after the tax year ends.

    If the issue is an in year adjustment, i. e, collecting a shortfall of tax that has accrued over the tax year but you would prefer this to be collected in the next tax year, then go online and request that the estimated underpayment is collected in 18/19.

    If the in year adjustment has been calculated using an estimate of incomes which are too high then adjust the details online and the code will be recalculated.

    Ultimately tax is due within the year the income is received. The idea of these codes is to collect the tax that is due in the year rather than have to send out millions of assessments each year either giving refunds for over deducted tax, or assessments requesting additional tax. All of which cost money to produce.

    The issue regarding the changing tax codes online is this.

    The online tax account shows the code the system believes should be in operation based on the pay/tax details held for year to date, and the number of dsys left in the tax year.

    Just because this code is shown on the screen it does not mean it has been issued. The only time a code is issued is when you have received a paper/digital P2 notice of coding.
    To equate judgement and wisdom with occupation is at best . . . insulting.
    • polymaff
    • By polymaff 6th Jan 18, 11:06 AM
    • 1,852 Posts
    • 798 Thanks
    polymaff
    I know that plenty of threads have been down to a misunderstanding of Payments on Account - but:

    Has anyone seen the new P2 - introduced by HMRC late in November? This jacks up your tax code in an attempt to get their estimate of your tax liability for 2017/18 paid by 5th April 2018.

    Incidentally, I went online on receiving this P2 (dated 20th December 2017) this afternoon. It turns out that that P2 has already been overtaken by a new P2 that demands even more tax-in-advance!

    Plus the same Payments on Account they wanted before they made these new demands.
    Originally posted by polymaff
    ... the quote seems to make it clear that by the end of this tax year HMRC will have, via re-coding, taken an extra, significant, sum from a PAYE-based occupational pension of mine.

    This year - for me - has been rather like 2016/17 so the HMRC PoA estimates for 2017/18, based upon 2016/17 are pretty-well right. Thus the first 50% they want by 31st January as a Payment-on-Account for 2017/18 is acceptable - but this other in-year tax-grab of over 50% more is not acceptable - and there's no sign of them cancelling the July 31st demand for the second 50% PoA - yet.
    Originally posted by polymaff
    For those following - especially Madgagoo - having spoken to HMRC, it is as suspected.

    The new system, as per MTD philosophy, uses third-party, in-year, data from banks, etc. to ferret out taxable income - particularly interest - and then triggers a P2 to tax - asap - that discovered income. Problem is - and HMRC admit this to be a bug in the new system - it doesn't notice if PoA is already in operation and has made a demand for estimated tax on those discoveries - before they were discovered!

    What a shambles! What does this do but confirm what a shambles MTD will be.

    Anyway, P2 issued cancelled. Updated, even more wrong, P2 waiting to be issued stopped, and a promise that a P2 reverting to previous, benign, L-type PAYE coding to be issued to my pension provider within three working days. They promise.
    • EdSwippet
    • By EdSwippet 6th Jan 18, 11:55 AM
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    EdSwippet
    For a counter-example...

    In this tax year I have taxable investment income, but no salary or pension withdrawals so no PAYE. And by pure chance I avoided 'payments on account' this year. HMRC can set my tax code to whatever they like but they get nothing out of it. With investment income paid gross, the outcome appears to be that I pay none of my 2017/18 tax bill until Jan 2019.

    Result!

    Next year I will probably face some 'payments on account' so not quite as good, but for now I can't help but feel the new system has handed me a 'golden ticket' for the current tax year.

    TL:DR -- HMRC attempts to extract tax on investment income upfront through PAYE won't work on people who have no PAYE income.
    • polymaff
    • By polymaff 6th Jan 18, 12:30 PM
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    polymaff
    For a counter-example...
    Originally posted by EdSwippet
    Completely irrelevant. What you describe is nothing new.
    • EdSwippet
    • By EdSwippet 6th Jan 18, 12:51 PM
    • 652 Posts
    • 618 Thanks
    EdSwippet
    Completely irrelevant. What you describe is nothing new.
    Originally posted by polymaff
    Well, I wouldn't have received all my income without tax deducted at source in past years when interest was paid with 20% tax paid. And my tax owed at year end would also have been less when there was a 10% credit on dividends.

    So perhaps not entirely new for everyone, but certainly a change over what would have happened in previous years for me. And now probably less niche and more common for others also.
    • polymaff
    • By polymaff 6th Jan 18, 2:43 PM
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    • 798 Thanks
    polymaff
    Well, I wouldn't have received all my income without tax deducted at source in past years when interest was paid with 20% tax paid. And my tax owed at year end would also have been less when there was a 10% credit on dividends.

    So perhaps not entirely new for everyone, but certainly a change over what would have happened in previous years for me. And now probably less niche and more common for others also.
    Originally posted by EdSwippet
    Yes, but your particular affairs listed are not in any way relevant to a new, serious HMRC error, that may affect many - which is what this thread attempts to throw some light upon. Ten years ago your first payment date, on the spread of income you describe, would have been the same as now.

    The present is complex enough without others throwing in red herrings.
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