3 jobs, 2 on BR tax code - what happens if earning over the limit for upper level tax

fimonkey

Posting on behalf of a friend as we are disagreeing on what would happen in the following situation.

They have 2 P/T jobs that make up 40hrs per week, and from these earn a gross annual salary of approx £33K. On one of these jobs he uses his tax allowance, and his code for his second job is BR. - so far so good.

He also has a 'zero hours' contract (a seperate 3rd job) where he works on an adhoc basis. Until two years ago this was about 16 hours per year! This is also PAYE and has the BR tax code. However over the past two years hehas done a lot more work under this contract and thinks he has passed the Gross Limit for upper earnings (i.e is now in the 40% tax bracket).

He has never been asked to complete a self assessment and has not kept his p60's (even from this year - D'oh).

He thinks as it is PAYE then it will have been automatically sorted, but I am not too sure, as far as I know tax codes don't go up and down per month depending on your earnings do they? I think that if his latest payslip is BR for the zero hours contract then it will have always been BR and he has possible underpaid.

If I am right, what should he do? He's not chomping at the bit in terms of ringing HMRC becasue he isn't in a position at the moment to pay back anything - although in 6 months time he should be. Should he stay quiet for 6 months? or see an accountant (bearing in mind he is not too rich). .. As a very rough estimate he has probably earned about £42-45KK per annum, Gross, from the 3 jobs over the last two years.

Thanks in advance

fimonkey

PS - before anyone makes a comment about earning 45K and not being too rich - bear in mind I haven't given you the full circumstances and there's no need to either - but he could not afford more than about £10 per week as a payback until after 6 months when a major debt is cleared.

bargainbetty

HMRC will get to the end of the financial year and notice any discrepancies. They will ask for the money. Trust me, they always ask for the money. They will provide a breakdown of each amount earned and how they did their sums, and it will be up to him to dispute it or pay it.

It may not flag up for a while, but it will land on him if he owes money. They may simply issue a revised tax code to take the money straight out of his salary, and there will be very little he can do unless he comes up with a repayment plan instead.

Good luck

CLAPTON

the 40% tax level starts at 41,750 (net of pension payments)

if he goes over this then the BR codes will not recover sufficient tax.

he should contact HMRC at year end once he knows his yearly earnings.


with the recently introduced real time payment system they should know anyway but better he resolve it himself.

fimonkey

Thanks, he was under the impression they would notice discrepancies - but they didn't notice hiw gross amount last year or this. I am under the impresison that HMRC are useless so I wouldn't rely on them regardless of systems/software.

Clapton, what do you mean 'net of pension payments' - that he has to have earnt 41750 but this is AFTER his pension?

What does he need (how many payslips etc) to calculate what he may owe, and can you get copies of the p60 from the tax office?

Sorry to sound so dense

CLAPTON

fimonkey wrote: »

Thanks, he was under the impression they would notice discrepancies - but they didn't notice hiw gross amount last year or this. I am under the impresison that HMRC are useless so I wouldn't rely on them regardless of systems/software.

Clapton, what do you mean 'net of pension payments' - that he has to have earnt 41750 but this is AFTER his pension?

What does he need (how many payslips etc) to calculate what he may owe, and can you get copies of the p60 from the tax office?

Sorry to sound so dense

if e.g. he paid 5,000 towards a pension then he could earn 46,750 before paying any 40% tax.


his pay slips for March should show his total gross wage for the year

jem16

fimonkey wrote: »

Clapton, what do you mean 'net of pension payments' - that he has to have earnt 41750 but this is AFTER his pension?

As Clapton says, paying into a pension reduces his taxable earnings. However he must include all of his income, including any income from savings interest or dividend payments.

So basically add up his gross earnings, savings interest, any taxable benefits from work, any dividends from investments. Then take of any gross pensions made to a pension. If the final total is over £41,450 then he will owe tax.

What does he need (how many payslips etc) to calculate what he may owe, and can you get copies of the p60 from the tax office?

Sorry to sound so dense

March payslips will give this info if he no longer has the P60s. Failing that he would need to get a statement of earnings from his employers. HMRC don't issue the P60 - his employer does.

However by this time of year it is likely that HMRC have all the information from tax year 2012/13 and he will probably get a notice of underpayment if there is one.

xylophone

RTI has arrived - http://www.hmrc.gov.uk/payerti/getting-started/paye-basics/rti.htm

He'd be well advised to contact HMRC before they contact him?

fimonkey

Thanks all, from us both. ...

He says....if RTI is here then theyll automatically contact him and sprt it out,

She says.... what's the best way to contact tax office, I hear hprror stories of 0845 numbers and being on hold for ever which is costly.

..bad typing is my fat fingers n unresponsive phone, sorry.

fimonkey

Two more questions if I may......

If you find yourself earning close to that limit, can you make extra pension contributions to bring it below and thus only pay BR

Is therea tax book for dummies/simple website thatbgives tax scenarios n tax cutting advice..?

Thanks

jem16

fimonkey wrote: »

Thanks all, from us both. ...

He says....if RTI is here then theyll automatically contact him and sprt it out,

No doubt but it would probably help any underpayment this year if he sorted it out more quickly..

She says.... what's the best way to contact tax office, I hear hprror stories of 0845 numbers and being on hold for ever which is costly.

HMRC are now using 03 numbers instead of 0845 so it will come out of any inclusive number packages.

fimonkey wrote: »

Two more questions if I may......

If you find yourself earning close to that limit, can you make extra pension contributions to bring it below and thus only pay BR

Yes you can. I do this every year. However you need to keep an eye on how much you will earn over the year and make the pension contribution before the end of the tax year.

Is therea tax book for dummies/simple website thatbgives tax scenarios n tax cutting advice..?

Thanks

I doubt it but you never know.