Tax Underpayment from 07/08 - should I challenge?

splatt30

In February HMRC wrote me saying they had found I owed £630 from 07/08 because when I changed jobs the tax code wasn't applied correctly.

This week I received further letters that for the same reason I owed similar for 08/09 and 09/10. (I'm not a serial job swapper but work for the NHS & rotate between trusts!!).

I never thought I had complicated tax affairs. Only ever one employment, all tax collected by PAYE, no other income etc etc. NOw They say I owe them close to £2000 over the last 4 years. They aren't demanding a cheque but say they will collect via tax code over next 2 years.

I genuinely a bit in shock over the whole thing. I genuinely thought I had paid all tax owed via PAYE. Is it really my fault that they can't do their sums when people change jobs. I have seen some rumblings in the press of people disputing this underpayments. Is this the sort of situation where it might be succesful? and if so how should I go about it?

jem16

What tax code have you been on since 07/08? I shall take a guess and say it was a BR tax code and so you have underpaid tax at 40%.

Did you hand in your P45 or complete a P46?

splatt30

It's always been the standard rate L tax code, sometimes cumulative sometimes noncumulative, though that never seems to make any difference to take home. P45 always arrived way too late (7-8 weeks later) for start of new jobs and new trusts were always happy with just filling in ?P46. I literally would work in one NHS trust on Tuesday and another on Wednesday. I just find it amazing in the modern age when one's NI number follows you everywhere that they fail to realise that the incorrect amount has been taken until 4 years down the line

jem16

splatt30 wrote: »

new trusts were always happy with just filling in ?P46.

When you filled in the P46 which box did you tick?

http://www.hmrc.gov.uk/forms/p46.pdf

Have you asked HMRC how the underpayment arose?

BargainHunters

This is fairly common nowadays to be honest.

If your moving job so frequently you would probably be better going on a BR tax code and then reviewing at the end of each tax year. You would therefore never have an underpayment unless you reached the higher rate tax bracket and if anything probably have an overpayment.

I would suggest you let an accountant have a quick look over it to double check it as it would not be the first time HMRC have been wrong. I would also try and stretch the repayment over 3 or 4 years so you don't notice it as much on your net pay.

Nothing worse than a tax liability you never knew about!!

suso

BargainHunters wrote: »

This is fairly common nowadays to be honest.

If your moving job so frequently you would probably be better going on a BR tax code and then reviewing at the end of each tax year. You would therefore never have an underpayment unless you reached the higher rate tax bracket and if anything probably have an overpayment.

I would suggest you let an accountant have a quick look over it to double check it as it would not be the first time HMRC have been wrong. I would also try and stretch the repayment over 3 or 4 years so you don't notice it as much on your net pay.

Nothing worse than a tax liability you never knew about!!

not knowing your full circumstances so having to make some assumptions from other people in your situation.

I guess you are a higher rate tax payer, and received payments after you left the employment, these would have been taxed at the basic rate so this is where the addition liability has come from.

As for repaying over 4 years, no such provision applies. the longest time for repayment is 3 years

BargainHunters

No such provision applies??

The length of time you repay it over will come down to how competent you are when you speak to someone from HMRC. I would argue that this has resulted from mistakes by your employer and therefore if you have underpayments for 4 tax years I would argue to repay over 4 years. HMRC should also have picked up on it before now. The average person is not going to be able to calculate at the end of each tax year if you have underpaid tax and why would you!