Tax Underpaid

NB1988

Hi all,

I just recieved a letter from HM Revenue and Customs saying that I have tax underpaid for tax 2009-10.

It says I had 2 employments at the same time. I had only one job but I also had a pension every month so I'm assuming that's what it is.

Theyre saying I am underpaid £819. I earned £7000 in that tax year from my work (student placement job), and I had a pension of £340 a month.

If the pension counts as income then it seems to be correct. It's a death pension from a company.

This tax year, they have taken £110 from me per month. As its a new tax year, shouldnt I be back to paying no tax, as I haven't gone over the threshold, and wont this tax year?

How do they usually take the underpaid tax from me? Would they take it in 1 payment (i.e. take my entire months wages from me), or could the £110 a month I'm paying, be paying off the underpayments from the last tax year?

Thanks for any help.

System

They will start collecting the underpaid tax from your main source of PAYE income from 6th April 2011.

Now questions -

Is your pension now your only source of PAYE income or do you still have employment?

What tax code is being applied to your pension and/or employment?

Lokolo

It's how PAYE works. You Pay As You Earn.

HMRC don't know you will be stopping work early and circumstances change too easily so the idea is that you pay based on what you earn over what period. So if you pay monthly you will pay income tax on anything over ~£500.

However, I assume you are leaving in the next couple of months and going back to uni like myself. In which case you will get a P45 and you can claim back.

I am not sure how the underpayment gets paid back. They may change your tax code, although if they haven't by now then they may not. It might be worth ringing up your tax office to find out.

jem16

NB1988 wrote: »

If the pension counts as income then it seems to be correct. It's a death pension from a company.

Yes a pension counts towards your taxable income.

This tax year, they have taken £110 from me per month. As its a new tax year, shouldnt I be back to paying no tax, as I haven't gone over the threshold, and wont this tax year?

Tax doesn't work like that. You don't pay no tax until your hit the threshold and then start paying tax.

Each month you get one twelfth of your tax free allowances so it's spread over the whole year. One twelfth of £6475 is £539.58 so if you earn over that each month you will pay tax.

At the end of the tax year in April 2011 if you have paid too much tax you can claim a refund. However remember that as you have a pension of £340pm you will have used up £4080 of your tax-free allowances.