Wrong Tax Code - Underpayment from previous year

les_jordan

I'm sure there are plenty of "wrong tax code" posts on here, but this one's a little different. I'd really love someone's opinion or advice on this.

I got a P2 form from HM Revenue & Customs today. The letter tells me that as of the next tax year (April 6th 2013), I will be on tax code K208. I'm no expert on tax codes, but I recognise this is unusual and immediately call up to query it.

It becomes apparent quickly that this code is intended to pay back an underpayment (and a considerable one) from a previous tax year. I actually did have an underpayment from a previous year which I knew about (long story short - several years ago, I worked a second job part-time and was paid tax-free as if I didn't have a main employment elsewhere. Obviously this was wrong but I was too young at the time to realise the error. Looking into this last year, I see that they're right; I do, indeed, owe them money).

The problem is that I took the hit at the time and paid the underpayment in full by cheque. I wouldn't usually pay by cheque, but this was how I was advised to pay. I sent the cheque at the end of August 2012, and a few days later the money came out of my bank account. It was a bit grim but that was that - I forgot about it.

Now I've been allocated this tax code as if I hadn't already paid back the underpayment and they have no record, as such, of receiving the cheque (the cheque has been cleared from my account so presumably they have cashed it, just simply not in conjunction with any of my details). I'm told it probably hasn't been "allocated" but 5 months seems a long time for a payment to be unallocated.

So, I'm finding it a bit distressing. I have given them every piece of detail I can, from the cheque number and bank details to the day it was taken from my account. I'm told it will take 3 - 4 weeks to investigate and then someone will call me. There's no guarantee it will be good news! The last thing I want is to be be paying back something automatically through my salary that I have already paid last August.

I'd love to hear some views on this.

Carl

madgagoo

Have had a similar thing happen a few times with clients. Cheque has been cashed but not allocated to their record. The Revenue took all the details as you have given to them above.

In all the cases I have dealt with I have eventually got the funds in the right place and HMRC have admitted they had the money all along. I say eventually as it has taken months in some cases. When they 'found' the money, they then took the restriction out of the tax code and any over deducted tax to date was refunded through the next pay packet.

Note, I say eventually. In some cases it has taken months! Although some have been sorted in a couple of weeks. Keep chasing them, once a month should suffice, in writing and keep copies of the letters.

If they won't adjust your tax code now then look on it as a savings plan for when they eventually do! With a bit of luck it'll get sorted before 6 April and won't actually ever affect your pay.

System

les_jordan wrote: »

I'm sure there are plenty of "wrong tax code" posts on here, but this one's a little different. I'd really love someone's opinion or advice on this.

I got a P2 form from HM Revenue & Customs today. The letter tells me that as of the next tax year (April 6th 2013), I will be on tax code K208. I'm no expert on tax codes, but I recognise this is unusual and immediately call up to query it.

It becomes apparent quickly that this code is intended to pay back an underpayment (and a considerable one) from a previous tax year. I actually did have an underpayment from a previous year which I knew about (long story short - several years ago, I worked a second job part-time and was paid tax-free as if I didn't have a main employment elsewhere. Obviously this was wrong but I was too young at the time to realise the error. Looking into this last year, I see that they're right; I do, indeed, owe them money).

The problem is that I took the hit at the time and paid the underpayment in full by cheque. I wouldn't usually pay by cheque, but this was how I was advised to pay. I sent the cheque at the end of August 2012, and a few days later the money came out of my bank account. It was a bit grim but that was that - I forgot about it.

Now I've been allocated this tax code as if I hadn't already paid back the underpayment and they have no record, as such, of receiving the cheque (the cheque has been cleared from my account so presumably they have cashed it, just simply not in conjunction with any of my details). I'm told it probably hasn't been "allocated" but 5 months seems a long time for a payment to be unallocated.

So, I'm finding it a bit distressing. I have given them every piece of detail I can, from the cheque number and bank details to the day it was taken from my account. I'm told it will take 3 - 4 weeks to investigate and then someone will call me. There's no guarantee it will be good news! The last thing I want is to be be paying back something automatically through my salary that I have already paid last August.

I'd love to hear some views on this.

Carl

Based on the details you've given them (cheque number etc) it should be relatively easy to trace your payment and get it allocated to your record.

You've done exactly the right thing contacting them early. They should have plenty of time to get things sorted and get a new tax code in the post.

cotswoldaccountant

The tax code notification should state quite clearly how the code has been calculated. A code of K208 means:
- your untaxed income was approximately £2,080 greater than your taxable income and
- as a result, approximately £2,080 must be added to your total taxable income to ensure the right amount of tax is collected.

If you have already paid back the underpayment, and have provided HMRC with the relevant evidence to support this, then I would be inclined to telephone HMRC and request that the amendment is taken out of your tax code until the investigation is complete.

If HMRC will not amend the code, the new code is not effective until 6th April, so there are still a couple of months left for HMRC to "find" the payment and remove the underpayment from your code.

les_jordan

Thank you for your replies - very useful advice. It's nice to know that this kind of thing is not uncommon, or, at least, not completely unheard of!

I think I'll wait 3 weeks in the first instance and then maybe call them if I haven't heard anything. This should still leave plenty of time to hopefully sort this out. I'm tempted to back up my phone call by writing to them to reiterate what was discussed on the phone and to confirm the details. I might also suggest that I should not be on the K Tax Code whilst it is being investigated, but could be pushing my luck a bit.

I may also contact my bank to see if they can confirm who exactly cashed in the cheque. I don't know if this is possible.

I will let you know if there is any progress!

antonic

When you paid by cheque did you quote any reference numbers on the back of it ?

If you didnt HMRC wouldnt know who it was from and would have put it into a suspense account.

To assist HMRC find it, send them a copy of your bank statement which shows the date that it was cashed AND which shows your bank sort code & account number (this will help them trace the payment) - you can obliterate ALL the other entries on the statement apart from this one.

Please post back if you need more help.

les_jordan wrote: »

Thank you for your replies - very useful advice. It's nice to know that this kind of thing is not uncommon, or, at least, not completely unheard of!

I think I'll wait 3 weeks in the first instance and then maybe call them if I haven't heard anything. This should still leave plenty of time to hopefully sort this out. I'm tempted to back up my phone call by writing to them to reiterate what was discussed on the phone and to confirm the details. I might also suggest that I should not be on the K Tax Code whilst it is being investigated, but could be pushing my luck a bit.

I may also contact my bank to see if they can confirm who exactly cashed in the cheque. I don't know if this is possible.

I will let you know if there is any progress!

njm123

Call HMRC - the left hand doesn't know what the right hands doing half the time.

I've had a similar problem with an underpayment, sorted now.

Basically was told on SA that I had to settle as amount was larger than allowed to collect in tax code and I had to pay an amount on account for following year.

I paid by direct debit - then received a tax code to collect the "owed" tax the following year.

In my case the money at least showed up in my online account as available for repayment.

The reason given was that I hadn't ticked the box to say I didn't want it collected by the tax code - it was greyed out as amount exceeded the limit to collect! However the limit was altered at the budget and obviously applied retrospectively so someone decided I wanted it collected in the tax code despite payments being set up ready to collect.