They have lowered my tax code????

puddy

I received a letter from HMRC yesterday saying that my tax code has been lowered by £185 because of 'taxable expense payments'.

I have just phoned them and they say that this is petrol expenses and that they received this information on a P11D (or something like that)

Now I complete a self assessment as although I go through the pay roll for this particular employer (named on the tax code letter), I am also self employed via other agencies.

So last year I completed a tax return which means that for the petrol payments that I received from this particular employer (45p per mile), 40p of that was allowable expenses and 5p was taxable, which was paid as I completed a tax return.

the P11D or whatever it is, obviously refers to last year, so why am I effectively paying tax twice on excess petrol payments (the 5p per mile)?

I need to dig the P11D out to check what it has on it and she said I must phone my employer Monday if Im not sure about all this, which I will, but Im very confused

Help!

puddy

Actually I have just realised that the P11D she may be referring to is for tax year 10-11 and obviously I have not done my tax return for that year yet (its due in Oct this year).

Does that make any difference?

But the tax code change refers to this year?

jennifernil

Once you have had some expenses, they tend to assume you are getting the payments evey year, so put them into your tax code.

puddy

jennifernil wrote: »

Once you have had some expenses, they tend to assume you are getting the payments evey year, so put them into your tax code.

now that i have dug out the p60 and p11d, i see what the problem is

i didnt earn enough on paye to pay tax with this particular employer tax year 10-11, so the 'taxable benefits have not been paid tax on

so i assume they feel that if i earn that next year then they need to ensure that its taxed next year? but if i didnt earn enough to pay tax then why would they want it taxed? is the taxable benefit amount included in the p60 total? it must be yes?

anyway, next point is that i am also self employed so will be paying tax for tax year 10-11, therefore, if i pay tax on that £185 for year 10-11 (when i earned it) but have it taken off my tax allowance for year 11-12, that means im taxed twice on it surely?

jennifernil

If it is on a P11D it will not also be on the P60. P60 shows what you have earned and tax paid, P11D shows expenses (untaxed) and benefits.

Your total earnings from employment and self employment are what you are taxed on, if you had expenses of more than was allowed, that will be added in too.

By putting it in your tax code, they are assuming that you will get these expenses in the current year too.

If you do a tax return every year, you will be paying the correct amount for each year. All tax deducted through PAYE is deducted from what you are due to pay and you pay only the difference, so if you paid it via PAYE you will not pay it a second time.

jimmo

jennifernil wrote: »

If it is on a P11D it will not also be on the P60. P60 shows what you have earned and tax paid, P11D shows expenses (untaxed) and benefits.

Your total earnings from employment and self employment are what you are taxed on, if you had expenses of more than was allowed, that will be added in too.

By putting it in your tax code, they are assuming that you will get these expenses in the current year too.

If you do a tax return every year, you will be paying the correct amount for each year. All tax deducted through PAYE is deducted from what you are due to pay and you pay only the difference, so if you paid it via PAYE you will not pay it a second time.

Spot on.
Just to emphasise the point it is important to understand that with one exception your tax code for a particular year is intended to reflect your potential tax liability for that particular year. If you received taxable benefits in the past your tax code should reflect what HMRC anticipates you will receive in taxable benefits in the current year.
The one exception is that HMRC can adjust your code in order to collect an underpayment for a previous year. In that case the description should be very clear, to collect an underpayment.

puddy

jennifernil wrote: »

If it is on a P11D it will not also be on the P60. P60 shows what you have earned and tax paid, P11D shows expenses (untaxed) and benefits.

Your total earnings from employment and self employment are what you are taxed on, if you had expenses of more than was allowed, that will be added in too.

By putting it in your tax code, they are assuming that you will get these expenses in the current year too.

If you do a tax return every year, you will be paying the correct amount for each year. All tax deducted through PAYE is deducted from what you are due to pay and you pay only the difference, so if you paid it via PAYE you will not pay it a second time.

right, i wondered this, so that £185 taxable benefits (the 5p per mile extra) AND the 40p per mile allowed, is not included in my p60 income amounts??

so when i complete the tax return, in respect of income from this employer, i need to put in the p60 amount for income, plus the amounts on the p11d?

so then this tax return for 10-11 will create a tax liability for that taxable benefit.

so then why do they keep the lowered tax code for this year as that is going to mess up my tax for this year? as when i fill in a return for next year there is no where to record that last year (10-11) i did actually pay tax on the £185?

puddy

jimmo wrote: »

Spot on.
Just to emphasise the point it is important to understand that with one exception your tax code for a particular year is intended to reflect your potential tax liability for that particular year. If you received taxable benefits in the past your tax code should reflect what HMRC anticipates you will receive in taxable benefits in the current year.
The one exception is that HMRC can adjust your code in order to collect an underpayment for a previous year. In that case the description should be very clear, to collect an underpayment.

thank you, the problem is that I am a sessional worker so i dont have a regular income from this employer, i do work when i am willing and able to (and obviously if im asked)

thing is, when i worked for my employer as a permanent full time worker, we had car allowances and obviously had taxable benefits on the extra 5p a mile then, every year and i dont remember my tax code changing then?

dtaylor84

puddy wrote: »

so then why do they keep the lowered tax code for this year as that is going to mess up my tax for this year? as when i fill in a return for next year there is no where to record that last year (10-11) i did actually pay tax on the £185?

The tax you pay will be recorded on your P60 - you will tell the HMRC how much tax you have paid and they will deduct that from the tax you owe.

puddy

dtaylor84 wrote: »

The tax you pay will be recorded on your P60 - you will tell the HMRC how much tax you have paid and they will deduct that from the tax you owe.

i didnt earn enough to pay tax, i earned under the threshold, my P60 has only got earnings of just over 6k? even if you put the £185 on it, its still under the threshold

puddy

dtaylor84 wrote: »

The tax you pay will be recorded on your P60 - you will tell the HMRC how much tax you have paid and they will deduct that from the tax you owe.

what i mean is, they have changed the code which means i have less allowance. so what happens if this year, i do not get taxable benefits of £185?