Need help with my tax code please!!

amalis

I am about to go crazy because I cant understand it! My tax coding change notice says that I owe 241.00 underpaid tax for medical benefits and that's why they reduce my tax code from 647L to 347L for the next tax year. I can't understand how can it be? How much is actually the difference in "real" money? how much less will i get? i feel such a reductions is not justified! can anyone please explain.

Mikeyorks

Your employer is providing medical insurance? It's known as a 'benefit in kind' and is taxable.

The fact there is an underpayment implies the benefit has been in place for close to a year. So your personal allowance will be reduced by around £1200 to recover the £241 this year .. The further reduction of £1800 will be to take account of the tax due on the benefit throughout 2010-11.

All assumes you pay tax at 20%? The overall reduction of £3000 in your allowances means you will pay an extra £600 in tax over the coming year. That's £50 per month ..... of which £20 is towards the previous (part) year underpayment.

Does that rationalise it a bit?

amalis

Thank you, Mikeyork! I see you understand taxes. The problem is htat i had this medical insurance only for one year (2008-2009) and the benefit was 1547 gbp. does it really coast so much (ie 600 gbp) in taxes? i wish i knew.

amalis

Mikeyorks wrote: »

.

The fact there is an underpayment implies the benefit has been in place for close to a year. So your personal allowance will be reduced by around £1200 to recover the £241 this year .. The further reduction of £1800 will be to take account of the tax due on the benefit throughout 2010-11.

Does that rationalise it a bit?

this what i could not understand! but i was not getting this benefit in 2010-11! what can i do?

Mikeyorks

does it really coast so much (ie 600 gbp) in taxes

No. Without further detail I'm assuming (hence all the question marks) that the extra £1800 taken out of your Coding is because the benefit continues this year?

On it's own £1547 would cost you (£1547 x 20%) around £310. But doesn't your Coding Notice (P2) give a better breakdown of why exactly £3000 worth of allowances has been taken from your coding?

On the face of it .... it appeared to be a part year for a previous year (£1200 x 20% = the underpayment of £241) and then at least one full year of £1800.

Bit more detail?

Mikeyorks

I need to sign off.

Pop a bit more detail on from your P2?? And do you have a P11D figure from your employer?

But if all the £3000 reduction does relate to the medical insurance ..... you just tell HMRC that ..... but after this week as they're a bit busy.

If you can add more detail ..... someone will add to this tomorrow.

amalis

Hi,
got my coding notice to hand.
So here is the story:
I had my medical insurance only from Dec. 2007 to Dec 2008. The coast was 1594 (benefit in kind).
Completing my tax return for year 2008/09 they calculated that I owe them 241.25 (underpayment on medical benefit.) ok. fair enough.
Yesterday I received PAYE Coding notice which says:
£6475 -1594 -1206 (underpayment for previous year) = 3675 (which is my tax code now).
As I understand now from Mikeyork explanation is that extra 1594 is due to they think I still receive it? Is that right? I never had medical benefit in 2009 or further. Shall I tell them about this mistake or I still dont get it?

Mikeyorks

amalis wrote: »

£6475 -1594 -1206 (underpayment for previous year) = 3675 (which is my tax code now).

Right - thanks for that. I'm assuming the Coding Notice is for 2010-11 (ie starting from April)?

The £1206 reduction is to reclaim the underpayment of £241.25 (£1206 x 20% = £241.20). The further reduction of £1594 is too co-incidental to be other than that they believe the medical benefit is continuing?

There are some errors appearing in 2010-11 codings whereby their new PAYE system is dragging old data forward ..... but, either way, it is assuming the medical benefit continues.

If this is a 2010-11 code ...... you have until your first pay day in April to get it corrected. I would give them a ring towards the end of next week as you'll have a job to get through now because the 31st Jan due date for SA is clogging the lines.

The £1594 should be removed ..... so basically you will be paying an extra £20 per month next year in order to repay the £240 underpayment.

amalis

Mikeyorks, thank you for that! I would not understand it without your help.
Just one last question (because I never delt before with HMRC) is it better to write them a letter of explanation or to give a call?

Mikeyorks

Personally I would write .... as that's how I usually deal with them. But ...... I do suspect you will get it resolved more quickly by 'phoning.

suso

Phone them next week, simply tell them you won't have the benefit for the next tax year, they will remove it and issue a new code, it should only take a few minutes,

Next week is the optimum time as the week after, all the pensioners receive their coding notices so the phone lines will be clogged again.....