Need Tax Return Help re company benefits...

[Deleted User]

I wonder if someone on here is a tax wizard and knows the answer to my predicament...

I've been working for a company for 5 years, and had them paying private medical insurance for me, for that entire time.

I've recently started a self-employed sideline too, so I now have a tax return to fill in. I tell the HMRC system that I've had medical insurance, and it wants about £90 extra tax from me.

So, the questions are...

1) By telling the Self Assessment return about this, am I paying tax twice for it? (Once through PAYE as my Tax Coding Notice mentions the medical insurance, and then a second time through Self Assessment)

2) Have I been NOT paying tax on it for the last four years, before I started doing tax returns? (Which would surprise me because my P11D says "we send this info to HMRC", and my coding notice affords for the insurance benefit)

Any help greatly appreciated

jennifernil

You do have to declare all your income AND benefits on your SA return. Whatever tax has been deducted in PAYE will be taken into account. You will not be taxed twice on the same income.

jimmo

In theory, if your PAYE code includes an adjustment to take account of your medical insurance benefits the PAYE tax deducted would match you tax liability on your wages and medical benefits.
In practice, the coding adjustment that was included in you 2010/11 code number may well have been based on your actual medical benefits for 2008/09. That would have been the latest information available in January 2010 when HMRC originally set your 2010/11 code.
For those that are not in Self Assessment, HMRC are supposed to make an annual review of our liability and in your case they should check your actual medical benefits for the year against the coding adjustment used.
When HMRC make the annual review there is also a thing known as the assessing tolerance where they don't bother to take action on small underpayments that would cost more to collect than their worth.
Certainly for a couple of years HMRC failed to do the annual reconciliations and that has resulted in all sorts of problems to lots and lots of people. Make a search of this forum for A19 and you will find lots and lots of threads.
Bearing all that in mind it seems quite likely that you have been underpaying tax on your medical benefits for a number of years and, without figures, it is impossible to judge whether your underpayments have been within the assessing tolerance and correctly ignored by HMRC.
Now, as you have been taken into Self Assessment, the crunch comes. With effect from 2010/11, your first Self Assessment, your tax has to be exactly correct to the penny.
In particular, the assessing tolerances afforded to the rest of us are no longer available to you.
As thing stand, I would say that it is entirely possible that you have an underpayment of £90 for 2010/11 on your employment income alone and if it were not for the fact that you are now in Self Assessment, you might never even realise it.
It is also possible that you have filled in the on-line forms incorrectly.
If you have included your medical benefits in the employment pages of your Return you are probably correct but if, for some reason, you have declared your medical benefits in the self-employment pages, you still have a lot to learn.

[Deleted User]

jimmo wrote: »

If you have included your medical benefits in the employment pages of your Return you are probably correct but if, for some reason, you have declared your medical benefits in the self-employment pages, you still have a lot to learn.

Brilliant, thanks jimmo, that's really useful advice. I've put them on the Employment section, and left them off the Self-Employment section

Cheers again