HMRC Self Assessment Issue - Help Please!

metroarea

Hi All,

I have just received the HMRC's breakdown of what they believe I owe based on self assessment calculations. They made several errors which I have pointed out to them, and they admit, hence why I am wary of what they are telling me on this point:

The reason I owe them money is that the tax code generated for me for 10/11 tax year assumed I would earn less than 100,000. I actually earned more than this figure and so should not have been eligible for the personal tax allowance of 6,470. I understand this, but do not understand why they are then saying I need to pay the tax on this amount at 40%. Surely, as this allowance relates to the FIRST 6,470 I earned I would have paid tax on that amount at 20% not 40%, but they are charing me the tax now at 40%, making a repayment of 2,501 pounds.

Does anyone know if this is correct, or can I fight my corner atall on that point!?

Thankyou

Dave

cte1111

Yes that is correct, you owe them the tax on the £6470. You have already used up all of your 20% allowance with what has already been taxed. e.g. the first £6470 would have been taxed at 20% but then the 40% tax band would have kicked in earlier, effectively meaning you owe 40% on £6470.

Horace

I think that you would need to speak to an accountant with regards to tax matters and your self assessment. The HMRC don't put the figures into the self assessment - you do so it is possible that you have made the mistake which has been compounded by them.

metroarea

Thanks all.

All the figures they now have are correct so that's not the issue. The confusion on my part was just that as the tax allowance is quoted as being the the amount you can earn before paying tax, I assumed it was the first amount of your earnings, and therefore would be taxed normally at 20%. I now have to repay that at 40%, which seems strange. I guess me having had the allowance when I shouldn't have means that technically I should have reached the 40% banding 6,450 sooner than I did, meaning I should have paid 40% on an extra 6,450. Just seems that they have chosen the best rate for them to charge it at now!