Unexpected tax bill, need some advice

Tulip19

Hi

Need some tax advice..

I am in the RAF and last year received a Financial Retention Incentive to stay in for a further 5 years. This was paid to me in Feb 2010 and included on my P60.

HRMC have just written to me to complete a tax return after 7 years of not requiring one. The calculation now says I owe £2591! Now my return is as simple as possible, no other income apart from my salary and the FRI which was all on my P60.

I've used the money to reduce my mortgage and now am really annoyed at having to find the money. Why did this not come up at the time and why has it taken 10 months to suddenly work out I owe extra money?

Any ideas on what to do?

agrinnall

To start with, post the figures from the P60.

Mikeyorks

Tulip19 wrote: »

Any ideas on what to do?

Post the detail from the Return you submitted + the P60 details. And correct some of the obviously incorrect info? Feb 10 is not 10 months away?

System

Was it February 2010 or February 2011?

If 2011 then you haven't said how much your income was but the first thing that comes to mind given that they are asking you to do a tax return is that your income exceeded £100000 in 10/11.
If that is the case then you would not have been entitled to your full personal tax free allowance - http://www.hmrc.gov.uk/rates/it.htm and that is how the underpayment of tax arose. HMRC would only have become aware of the income after the submission, by your employer, of the P14 which was due by 19th May 2011.

Tulip19

Ok here are the figures from my P60

Tax Year to 5th April - 2011

Pay - 140981.70

Tax - 46320.80

I think I may have fallen foul of the loss of tax free allowance. Thought that started in this tax year.

Still annoyed that tax has been miscalculated by someone else.

zygurat789

Is this the first time you have been into the higher rate tax bracket and do you have any other income ie interest? What else did you put on yiour tax return?

Mikeyorks

Tulip19 wrote: »

I think I may have fallen foul of the loss of tax free allowance. .

That's exactly right. Your income above £100k has totally eroded the PA of £6475 (@40% = £2590)

Still annoyed that tax has been miscalculated by someone else

As it's a one off? There's no miscalculation. Had it been evident in advance (or by yourself?) then HMRC would have issued a sympathetic Code in advance :

http://www.hmrc.gov.uk/incometax/codes-basics.htm#2a

.......... and then ratified / refined it when the SA Return was submitted

Tulip19

zygurat789 wrote: »

Is this the first time you have been into the higher rate tax bracket and do you have any other income ie interest? What else did you put on yiour tax return?

Been higher rate payer for several years, did online tax returns for 3 years and then got told not to bother by HRMC. No other income, savings in other half name as non tax payer.

In all honesty, had not expected the bonus to be paid with all cutbacks going on so had paid little attention to stuff affecting people paying more than 100k. My mistake!

Any ideas if HRMC will want it all in one go or will take a settlement over time?

Mikeyorks

Tulip19 wrote: »

Any ideas if HRMC will want it all in one go or will take a settlement over time?

You make it sound the Return has recently been issued? In which case the due date is + 3 months from issue as opposed to 31st Jan.

The underpayment is below the £3k at which they will Code out over the following 12 months. But - the deadline date for that is usually 30th Dec. I don't think they will extend that for 'out of turn' Returns - but no harm asking. As that gives you interest free repayments over 12 months.

Outside that - almost certain they will be asking for repayment in a lump sum in the light of the income for that year.

Tulip19

Its not a normal return with the 31 Jan deadline, received the letter last week and it mentioned that it needed to be completed within 3 months of the letter date.

Hopefully this will mean it can go in the tax code for next year?

Mikeyorks

Tulip19 wrote: »

Hopefully this will mean it can go in the tax code for next year?

Can't add any more than my comment above. To the effect that I don't think they do extend the 30th Dec deadline ..... even for 'out of turn' returns. You can but give them a ring - if you've submitted the return.