Benefit in Kind.

Southernman

My current tax code is 287L. The reason for this is because i have a benefit in kind mortgage. Now the thing that confuses me so much about this is that firstly my mortgage is 4.39% and i thought you wouldn't get taxed if above 4%??? My friend who has a staff mortgage too doesn't suffer the same tax implications i do.

Now i've received my P11D which also makes no sense to me...

It says

GROSS AMOUNT

£3542.61

AMOUNT MADE GOOD

£3924.10

CASH EQUIVALENT

-£381.49

TOTAL TAXABLE BENEFITS AND EXPENSES FOR THIS EMPLOYEE

£0.00

Does this make any sense to anyone? I would deeply appreciate it if someone could help me out, even in terms of explaining what it means and if my tax code is wrong or not.

missindecisive

im understanding it as you have received £381 in employee financial benefits, but due to the small amount it is not taxable ? thats just a guess

00ec25

the gross amount is the taxable value of the mortgage benefit you have received

the amount made good is the money you have paid back to the company in mortgage payments you made to them

the taxable value is worked out at the official rate 4% whereas you are actually paying back at a higher rate 4.39% hence the cash equivalent of your benefit in kind is actually negative as you are deemed to have paid more than you "needed" to cancel out your tax liability. Sadly payments above the official rate will NOT allow you to claim a tax rebate hence the total is nil
all is explained on page 40 of the HMRC manual - particularly pages 45 and 46 explaining how the taxable value is worked out via either the averaging :think: or precise _pale_ method. Makes great bedtime reading :wave:
http://www.hmrc.gov.uk/guidance/480.pdf

the official interest rate is here
http://www.hmrc.gov.uk/rates/interest-beneficial.htm

jimmo

The descriptions used “Gross Amount” and “Amount Made Good” don’t appear on the HMRC version of form P11D

http://www.hmrc.gov.uk/forms/p11d.pdf

So, I guess that your employer has produced its own version and

“Gross Amount” represents interest at the official rate of 4%.

“Amount Made Good” represents the interest you actually paid at 4.39%.

Cross check,

Interest of £3542.61 at 4% represents a loan of £88,565.

Interest of £3924.10 at 4.39% represents a loan of £89,387.

You are correct when you say you wouldn’t get taxed if you pay interest at more than 4% and your P11D actually backs that up.

If you had been paying less than 4% the bottom line in your employer’s calculation would have been a positive figure and you would be liable to tax on that figure.

As you paid more than 4% the bottom line in your employer’s calculation is a negative (minus) figure and your taxable benefit is nil.

Assuming that the P11D is for 2011/12 and that there is no taxable benefit you now need to look what your tax code was for 2011/12. Assuming there are no other issues, your code for 2011/12 should have been 747L. If it was less you will have overpaid tax and will need to start chasing HMRC for repayment.

For the current year a normal code is 810L. Yours is way below that and, on the basis that you had no taxable benefits in 2011/12, you need to chase HMRC to correct it.

Now, what about previous years?

The fact that your current code has been restricted indicates that your employer has reported a taxable benefit in the past. Are you comfortable with that or do you need to start digging back?

00ec25

jimmo wrote: »

The descriptions used “Gross Amount” and “Amount Made Good” don’t appear on the HMRC version of form P11D

So, I guess that your employer has produced its own version

they are only doing what HMRC tell em to do Jimmo :rotfl: Although of course HMRC are rather good at not saying the same thing consistently otherwise the poor old punter might understand tax and put all those investigators out of work as the punter would then get it right first time

"Amount made good or from which tax has been deducted. In boxes with this heading on the form P11D enter any amounts which have been made good by the director or employee ..."

http://www.hmrc.gov.uk/guidance/p11dguide.pdf

Southernman

I only got my mortgage and started paying it in May 2011, my tax code at that time was changed to 387L. I do pay student loan too if that makes any difference.

Either way

i have not gained any tax related benefit so shouldn't have this disastrous tax code

2011/2012 it was 387L
2012/2013 it is 289L

thanks for all your help. Is my best option now giving HMRC a call? Should i explain to them exactly what my P11D states suggesting i have not received any taxable benefit in kind yet my tax code is horribly low and possibly needs adjusting?

Also my initial mortgage was £90000 so you were about right!

00ec25

yes you should contact HMRC as you have no taxable benefit per last year's P11D and so no reason for your code to be reduced.

for 12/13 you have been assessed as owing tax on £5210 of benefit (or other untaxed income) ie std allowance 8105 - code 2895. The fact the 12/13 code has been further reduced over the 11/12 code (when the benefit was £3600 ie 7475 - 3875) suggests HMRC think you have an income or benefit stream which has changed (or because you have now moved from 20% tax to 40%) so you need to sort this out with them soonest and also claim any overpaid tax from last year

however, before you do, check what it actually said on the P2 coding notice as (assuming you kept it!) the reason for a reduced code is always shown on there and without that explanation all we can do is guess why yours is (apparently) wrong

(student loan is irrelevant as that is exempt)

Southernman

I've no idea what a P2 coding notice is.

I rang up HMRC this morning explaining what you had all said in this thread and she said that after looking at my details she was going to change my taxcode to 810L and gave me an address to send my P11D off to in order for them to investigate the full extent of my rebate!

I wouldn't have been able to do it without the people in this thread though so i thank you!!!

00ec25

well done!

a coding notice is the letter they must send to you notifying you of the fact that you do not get the standard (8105) code. The notes at the bottom "explain" the reason for the amounts
see example here on HMRC
http://www.hmrc.gov.uk/p2/p2.pdf

kidmugsy

Southernman wrote: »

II wouldn't have been able to do it without the people in this thread though so i thank you!!!

Congratulations on your good manners.

jimmo

Well done but for goodness sake keep an eye on things. You should expect to receive a form P2 (Notice of Coding) in the post. That should say that your revised code number is 810L.

In my days on PAYE we posted the P2 and the employer’s equivalent, form P6, at the same time and, if you didn’t get your P2 it was a pretty fair bet that your employer wouldn’t have got the P6.

So don’t relax until your employer has changed your coding to 810L and you see the benefit in your pay packet.