Tax rebate question: I'm rather confuddled!

Dolly-Rocket

Please someone help me as my head hurts from not understanding! I've made two calls to the tax office and one to my works HR dept and I'm still 'not quite there' in terms of understanding.
So........
My work wrote to me telling me that I should nit have been taxed on certain travel expenses over the last six years (stating from 04/05 tax year to present day). They said I should claim it back via my tax office. So I sent off the letter they had sent me with a covering letter and copies of my wage slips from the last six years.
Tax office wrote back to me today saying that I have paid too much tax over the last six years, £1871 to be exact. They said that they are therefore adjusting my tax code with immediate effect to 820L. They said any refunds due will be paid via my employer. I called work and they said tax code had been changed plus I would be receiving a refund for this tax year of £250.

Now here is my problem. I normally earn £15,000 pa but at the moment I am on maternity leave and I estimate my earnings to be approx £9000 pa for 10/11. So do I only pay tax on roughly the £800? If I pay more is it a case if then waiting for my P60 to arrive and then calling them with my figures?
I get so confused because £1871 seems to be more than the tax I would pay on it. Don't think that makes sense but I sort of know what I'm trying to say. The tax I would pay on £1871 is obviously less than my overpayment of £1871, so I don't really understand their calculations.

If you understand why I'm confused please let me have dome advice, but please explain in a way only a ten year old would understand! I do find tax, taxing.
I guess I was just looking forward to a nice juicy cheque before Christmas and now I feel like I'm getting very little.
At the moment I earn about £500 pm on SMP and pay about £40 pm in tax, so even if I now stop paying tax, being £40 up a month between now and April seems little in comparison.
Sorry for being so dense.

Gertie_Walker

Yes, as your tax free allowance for the year is 8200 and your pay will be 9000, your tax liability for this year will be 20% of £800.
You will receive a large tax refund this month and further tax refunds over the coming months until the end of March when you will find you have paid £160.00 in tax.
Where you went wrong was in not asking for a cheque to cover the overpaid tax for the past 6 years - then you would have had your good Christmas. Unless you ask for this, HMRC put the overpayment in your code number and let your employer do the hard work.

Dolly-Rocket

Thank you that made sense !
It's just that they added the 1871 to my tax free allowance, so bearing in mind I won't have to pay tax on 1871, that seems less than getting a rebate of 1871! Head hurts again!

jennifernil

I would agree that this does not seem correct if you are due a refund of £1871. This would only give you a refund of the tax on £1871.

To get a refund of £1871 of tax, you would need to have £9355 added to your tax free allowance (assuming 20% tax). This is more than you expect to earn this year. Did the expenses you should not have been taxed on come to around that much?

If so, I would write to them again asking for this to be repaid by cheque and your code number to be restored to what it was. May take a while, but worth trying.

Dolly-Rocket

Thank you. I'm beginning to wonder if I have read it incorrectly. I'll spell it out below as they have worded it.
My work paid me £2335 in allowances over the last six years. This should not have been taxed but I paid the 20% on it. This is what I was initially claiming back. When I read their letter I thought it may be more as I've had three lots of maternity leave in those six years and never really checked my P60's, I just presumed they would be correct.
So here is what they wrote:

"Thank you for your letter dated ****** regarding your claim for expenses.
Please note I have amended your current tax code in respect of your claim. The revised code includes your expenses for 2010/2011 and an adjustment for the previous years from 2004/2005 to 2000/2010. A copy of the revised code will be issuedto you under separate cover. Any rebate due will be made through your salary when the revised code ids operated by your employers payroll dept."

Letter two:
Your new tax code for 2010/2011 is 820L which replaces 604L.

Here's how we worked it out.
Your personal allowance. £6475
Earlier years adjustment*. £1871
Job expenses. £688
TOTAL £9034

Medical insurance. -£834
tax free amount of. £8200

* this refers to tax you have overpaid in previous years.

jennifernil

That sounds OK, your expenses were £1871 for the previous years, plus £688 for the current year.

This is added to your code number, then any benefits deducted, such as your medical insurance.

So I'm afraid it is not a huge amount to get back after all. Still, even a little is better than nothing.

Dolly-Rocket

Thank you, for the first time that actually makes sense! £1871 is rather a lot to overpay when you're on PAYE! I just got thrown by the *tax you have overpaid in previous years. I saw little £ signs in my eyes and got a bit excited! Many thanks for your time.