unpaid tax-should I pay cash?

WaxiesDargle

hi

I have a final salary pension from my previous job and a paid salary (PAYE) from my present job.

last year I went into the 40% tax bracket... my tax wasn't adjusted at the time and I knew I would have to pay additional tax...I was waiting for this years P60

I had a PAYE coding notice which states

your personal allowance....£7475
adjustments to tax rate bands....-£2484
a tax free amount of.........£4991

tax code 499

my questions are..

should I pay this off cash and keep the 7475 allowance or leave it as it is?

or would it be no advantage by paying it off?

how much would I have to pay cash?

cheers

CLAPTON

no benefit is paying it off in one go .... no benefit in giving the money early as you get no discount

WaxiesDargle

thanks Clapton

jimmo

"Adjustments to tax rate bands" sounds more like an attempt by HMRC to prevent an underpayment arising in 2011/12 than an attempt to collect an underpayment from a previous year.
Code 747L would allow you to pay basic rate (20%) on up to £35,000 of taxable earnings.
Code OT would also allow you to basic rate on up to £35,000.
Basically, what the adjustment seeks to do is to collect another 20% on £2,484 of income.
So it appears that HMRC estimate that your combined taxable income will be £37,484.
If that seems reasonable to you, fair enough but remember that your forces pension is due for an annual increase about now. Also if you get a pay rise during the year that will also throw out the figures.
Looking now at any underpayment for previous years the first question is do you mean 2009/10, 2010/11 or both?
Certainly for 2010/11 the extent of the underpayment will not be known yet so you cannot know how much to pay even if you want to.
Again, as Clapton implies, if you can regard an underpayment as an interest free loan, that is one thing and you can let HMRC sort it all out in their own sweet time.
However, you might be more comfortable paying off underpayments as and when they are determined.
Unfortunately each pension increase and pay rise will throw another spanner in the works so I am afraid you will have to get used to it.

WaxiesDargle

thanks jimmo...it isn't a forces pension though

I was thinking the same, the 40% tax only came in during the 10/11 tax year, when i got a pay rise from my employment, thats why i thought I would wait for the P60