HELP! Tax Code Underpayment??

CHRISCHALMERS79

Hi There

Really hoping that someone can really help me out here as the Tax Office are completely useless and dont understand anything they say even when I have a good grasp of how the financial calculations are done.

Basically what has happened for the past 3 years, since I got a mortgage on a staff rate, my tax code started off at the standard 647L and proceeded to decrease to 480L as a result of an unknown underpayment of £510 even though all my tax is paid via PAYE and on the understanding that the reduced tax code would pay the additional underpayment in the current tax year.

The next year I got a further letter to say the underpayment was now up to £750 approx and tax code reduced now to 255L. Again tax office advise its a result of the underpayment repayments for that tax year, again advising that if I continue for that tax year then it will be paid off and resolved.

This year I have now been sent another coding notice advising me that my tax code is now 105L for the remainder of this tax year and an underpayment now totalling £1000.

How can this be possible when my P11D is spot on each year from my employer and sent to Tax Office immediately. I pay all my tax through PAYE and each year, even though on a reduced tax rate, the underpayment never seems to be getting paid off and actually increasing!

Im totally at the end of the road and with my tax code now at 105L this is basically around £70pm being taken from my monthly wage in additional tax and I do not see any end in sight.

I would understand more if the amount owing as an underpayment was reducing but its actually increasing and all the tax office are saying is that it has to remain on a low code to pay back the underpayment and it will resolve itself but I dont see how.

If anyone can help me out here,I would be so appreciated. Extra figures etc in terms of benefit in kind rates on my P11D are (2010-2011= £1326) as I moved into my property in Sept, so assume this would be taken into account for Sept to Apr and then this years 2011-2012 is £2666 for full year) but again tax code decreases and amount of underpayment increases.

Any other info needed, just let me know,

Thank you
Chris

jem16

Can you provide figures for the relevant tax years as to how the underpayments have arisen? What tax codes were used on each tax year?

CLAPTON

the P11D figures are of course produced after tax year end so they are never up-to-date

maybe give us the yearly benefits and final taxcode for each year since you started receiving the benefit

CHRISCHALMERS79

Hi There

Thank you both so much for the replies, and apologies for the delay, I stupidly sent all my documentation to the Tax Office for them to review but they have since replied with a copy of the my tax statements for 10-11 and 11-12 of which I already have so pretty pointless.

I have the breakdown as follows:-

Year 10-11

Tax Code as of April 2010 = 647L

Total Income = £55,264
Benefit In Kind = £1353

Income Tax Charged = £12,576
Income Tax Deducted = £12,034
Comes out with an underpayment of £542

Year 11-12

Tax Code as of April 2011 = 747L

I then received a letter out of the blue on 23rd Aug 2011 advising that I had underpaid tax from a previous year of £542 above (Which has been advised was a result of my buying a house in Sept 2011 and aquiring a benficial mortgage rate which is only advised to Tax office at end of Tax Year)

My Tax Code was amended to 480L to make up the underpaid tax.

Tax Statement 11-12

Total Income = £61,137
Benefit In Kind = £2922

Income Tax Charged = £15,633
Income Tax Deducted = £15,084
Comes out with another underpayment of £549

What I dont understand is if I was on a reduced tax code already then how can I not have paid off some of the underpaid tax which has now doubled?

I then received a coding notice on 25th Jan 2012 advising that my new Tax Code for year 6th April 2012 - 5th April 2013 will be reduced to 255L.

I then received another coding notice on 8th July 2012 advising that my tax code has been amended with immediate effect to 105L and that I have underpaid a total of more than £1000 which will be collected during this year and also in year 2013-2014.

Im at a total loss as to why all this comes about with the purchase of a house. I do understand that it is a benefit in kind and standard HMRC Rate for mortgages is 4% but even though my tax code is reducing therefore in my mind I should be paying off some of the underapid tax, it has actually doubled in 2 years and doesnt fill me with any confidence that its making any diiference, only getting worse.

Im really stressing about it, especially with a young family and losing around £100 a month of which I have no control over as all my tax paid through PAYE. It hs also been 2 years of constant bonuses and overtime of which given the current climate has no stopped therefore now especially harder to take the tax reduction for something I have no control over.

If there is anything someone cou;ld advise or help with then I would really appreciate it. Even if it was just to say that if I tough it out for the remainder of this tax year it should resolve itself then thats fine but it always seems to be going upwards rather than down.

Thank you so much

CLAPTON

it would seem :

in tax year 10-11 your BIK was 1353 so the tax owed was
1353 x 40% = 541.2


so in 11-12 they changed your tax code to collect the 542 owing plus making an adjustment to collect the same again (assuming same BIK for 2011-12) so reducing your code to 480L which collects about
1068 extra (i.e. (7475-4805) x 40%))


however in fact your BIK for 11-12 were 2922 and not the same as the previous year

so they should have recovered 542 from 10-11 plus 40% of 2922 i.e
542 + 1168 = 1,710

so at the end of 11-12 you owed 542+1168 - 1068 = 642 ish

so for tax year 12-13

you owe 642 from the previous year plus 1168 for the current year (assuming your BIK is still 2,922)
i.e. at total of £1,810
this corresponds with a reduction in tax allowance of 1810/40% = 4527

so your 2012-12 tax code should be 810 - 452 = 357L

so without the full details I would say they are wrong but presumably they have given you some paper work showing how they worked it all out