Paid too little tax on PAYE - any advice?

the_flying_pig

I recently had an unpleasant letter from the Inland Revenue, telling me that I paid too little tax for a couple of years a little while back. I wondered if anyone could offer any advice.

I can't quite tell why I paid too little tax. I've been in the same job since earlier than the trouble started, am on standard PAYE with no other income, and have had no really significant pay increases, bonuses, or cuts during this period, certainly nothing that takes me into different tax bands or anything like that. I've not kept p60s or payslips or whatever.

It just seems that some pay [not all of it] that should have been taxed at 40% ended up being taxed at 20%. This unfortunately happened without me noticing it for 3 years. Then the problem stopped, seemingly. I have been paying the right amount for the last 2 years, so they say.

My records aren't quite good enough for me to definitively check whether I did in fact underpay, but it looks likely enough TBH.

The money is quite significant to me - about 3-4 months' takehome pay. I'm not really in a position to pay it back in one go, although the very surly Inland Revenue call centre person who I spoke to seemed to be telling me that I ought to, my debts seemingly being fully or partly too old for me to pay spread out over a long period. The person on the other end of the phone seemed fairly clueless to be honest, as well as fairly aggressive, not really ideal for me with such a big amount of money involved.

Any tips on what I might do in this situation?

I suppose I'll have to pay the tax back [as seems fair if I genuinely unperpaid]?

Will I be able to get them to provide me with really detailed calculations explaining exactly what went wrong?

Will I be able to spread it out over a fairly long period [with or without paying interest on it]?

xylophone

I can't quite tell why I paid too little tax. I've been in the same job since earlier than the trouble started, am on standard PAYE with no other income, and have had no really significant pay increases, bonuses, or cuts during this period, certainly nothing that takes me into different tax bands or anything like that. I've not kept p60s or payslips or whatever.

Will I be able to get them to provide me with really detailed calculations explaining exactly what went wrong?

Yes - HMRC should provide you with their calculations.http://www.hmrc.gov.uk/incometax/p800.htm

Payroll did not adjust for 40% band? Did you not receive a Notice of Coding? Have you queried what happened with Payroll?

I have been paying the right amount for the last 2 years, so they say.

Payroll made the necessary adjustment? Again, did you receive a Notice of Coding? Presumably Payroll did or perhaps applied one given earlier correctly? You need to check.

Incidentally, was there not a note on your P60s advising you to keep them?

Will I be able to spread it out over a fairly long period [with or without paying interest on it?

You'll need to arrange repayment with HMRC. See link above - there is a suggestion of two or three years.

CLAPTON

I afraid only the full facts will help resolve the situation

chrismac1

Get the full facts. Ask your employer, failing that ask HMRC - if necessary under the DPA. Then consider a challenge under Esc A19 providing your circumstances qualify for this. You can find numerous posts on here about Esc A19, many of whom got the tax charges wiped.

Much depends on exactly what happened and exactly which tax years it happened in.

jem16

the_flying_pig wrote: »

It just seems that some pay [not all of it] that should have been taxed at 40% ended up being taxed at 20%. This unfortunately happened without me noticing it for 3 years. Then the problem stopped, seemingly. I have been paying the right amount for the last 2 years, so they say.

This situation is only likely to have happened if you were on a BR tax code instead of a proper tax code where some of your income was in the 40% band or if you had taxable benefits such as private health care or company car from your employer and it wasn't taken into account via your tax code.

Would either of these situations have applied?

My records aren't quite good enough for me to definitively check whether I did in fact underpay, but it looks likely enough TBH.

Why does it look likely if you don't know what happened?

the_flying_pig

jem16 wrote: »

This situation is only likely to have happened if you were on a BR tax code instead of a proper tax code where some of your income was in the 40% band or if you had taxable benefits such as private health care or company car from your employer and it wasn't taken into account via your tax code.

Would either of these situations have applied?

thanks for this reply.

i'm not sure i know what you meant by "on a BR tax code" - i suppose you mean a blanket 20

jem16 wrote: »

This situation is only likely to have happened if you were on a BR tax code instead of a proper tax code where some of your income was in the 40% band or if you had taxable benefits such as private health care or company car from your employer and it wasn't taken into account via your tax code.

Would either of these situations have applied?



Why does it look likely if you don't know what happened?

code? the funny thing is that the amount i paid isn't what you'd get if you took the personal allowance into account & then taxed the rest at 20%, nor is it what you'd get if you forgot about the allowance and taxed everything at 20%. the amount seems to be, well, just weirdly wrong, but i've not seen why yet.

i had some benefits at the time but small-time stuff, a gym membership i think that was it, so that's not to blame i don't think.

jem16 wrote: »

...Why does it look likely if you don't know what happened?

well, i just plugged my gross salary of the time into an online calculator thing, one that calculates your NI and tax. Although my records weren't very good re: pension contributions it certainly looked like my takehome pay was just a little bit higher than it should have been.

CLAPTON

I afraid only the full facts will help resolve the situation

well even one or two would help

jem16

the_flying_pig wrote: »

well, i just plugged my gross salary of the time into an online calculator thing, one that calculates your NI and tax. Although my records weren't very good re: pension contributions it certainly looked like my takehome pay was just a little bit higher than it should have been.

There are numerous reasons for this, one of the most obvious being pension contributions.

Without figures no-one can help you here.