Extra payment taxed at higher rate - taxman says NO!

tangomegadeath

Hi all,

I recently received a taxable (and I believe non-pensionable) fuel allowance lump sum from my employer for £5000 but my pay for that month showed £3000 extra rather than £4000 as I was expecting.

The extra payment wouldn't have taken me into the 40% bracket by a long way but when I asked HMRC they said my tax appears correct and that no refund was due.

I know other employees have chosen to receive their fuel payment monthly and have been taxed at 40% but have been able to reclaim the difference so I'm not sure why I can't?

It seems clear, to me at least, that £1000 should have been taxed rather than £2000, especially when presented with clear and beautifully rounded number like these!

Any clues as to why I can't get the difference back or what my next steps are?

D.

getmore4less

Don't forget NI.

Was it done as PAYE.

If it was then it should sort itself out depending on how long ago it was done.

if not PAYE why not?

chrisbur

tangomegadeath wrote: »

Hi all,

I recently received a taxable (and I believe non-pensionable) fuel allowance lump sum from my employer for £5000 but my pay for that month showed £3000 extra rather than £4000 as I was expecting.

The extra payment wouldn't have taken me into the 40% bracket by a long way but when I asked HMRC they said my tax appears correct and that no refund was due.

I know other employees have chosen to receive their fuel payment monthly and have been taxed at 40% but have been able to reclaim the difference so I'm not sure why I can't?

It seems clear, to me at least, that £1000 should have been taxed rather than £2000, especially when presented with clear and beautifully rounded number like these!

Any clues as to why I can't get the difference back or what my next steps are?

D.

If you want anyone to check this you will have to give the full details of that month's pay.
Taxable gross, tax paid, tax code,tax basis, tax month number or date paid, taxable gross to date, and tax paid to date. If applicable previous pay and tax to date.

00ec25

as previous poster says if you got this via a PAYE salary system then as a lump sum of 5,000 in a single month of course it was taxed at 40%, because PAYE assumes that you are now on a salary of 5,000 x 12 = 60,000pa

next month when you do not get a lump sum in your pay then the system will automatically adjust the tax you have paid as it now realises you do not earn in the 40% tax bracket and so will refund the overpaid tax

whenever you take a large lump sum this will happen. HMRC is not wrong, you have been taxed correctly in the month of payment and will correctly get the refund in the next month

chrisbur

00ec25 wrote: »

as previous poster says if you got this via a PAYE salary system then as a lump sum of 5,000 in a single month of course it was taxed at 40%, because PAYE assumes that you are now on a salary of 5,000 x 12 = 60,000pa

next month when you do not get a lump sum in your pay then the system will automatically adjust the tax you have paid as it now realises you do not earn in the 40% tax bracket and so will refund the overpaid tax

whenever you take a large lump sum this will happen. HMRC is not wrong, you have been taxed correctly in the month of payment and will correctly get the refund in the next month

This is a common misconception regarding PAYE. In fact PAYE makes no assumptions at all, it cannot, it is a few simple rules which when applied to a persons wages will in almost all cases calculate the correct tax due at any point in the year and with no adjustments needed the following month.
Month 1 you get 1/12 of your tax allowance 1/12 of your 20% allowance 1/12 of your 40% allowance and so on which is set against your earnings for month 1. Tax due is worked out and that is what you pay.
Month 2 you get 2/12 of your tax allowance 2/12 of your 20% allowance 2/12 of your 40% allowance and so on which is set against your earnings for months 1 and 2. Tax due is worked out and tax paid in month 1 is deducted and that is what you pay.
Month 3 you get 3/12 of your tax allowance 3/12 of your 20% allowance 3/12 of your 40% allowance and so on which is set against your earnings for months 1 2 and 3. Tax due is worked out and tax paid in months 1 and 2 is deducted and that is what you pay.
This goes on all year with each figure going up 1/12 for each month that passes.

So the idea of PAYE assuming anything is wrong although in the first week or month of a new tax year it can appear that way.

There are things that can alter this and things can go wrong but without the full figures no-one can tell what is actually happening in this case so we must have the full details in order to give any guidance to this OP.

tangomegadeath

Yep paye,

annoyingly, my employer has 'lost' my wage slip for that month.

chrisbur

tangomegadeath wrote: »

Yep paye,

annoyingly, my employer has 'lost' my wage slip for that month.

It should not be difficult for your employer to provide the details from the missing payslip even if they cannot produce another copy. As I said earlier it is only with these full details that anyone can help.

Savvy_Sue

tangomegadeath wrote: »

annoyingly, my employer has 'lost' my wage slip for that month.

So did they lose it before or after giving it to you? As chris says, they should be able to reconstruct it for you, and they are required to give you one!

getmore4less

tangomegadeath wrote: »

Yep paye,

annoyingly, my employer has 'lost' my wage slip for that month.

details off the previous month will probably do if you get the same pay every month except for this bonus(just say what that was exactly gross)

CraigR

Couple of points, firstly this payment may have been made in the March payslip in which case it would be the final month of the tax year so there won't be a refund next month as it will be a new tax year.

Secondly OP believes it only just enters the 40% band but as this is a fuel allowance there might be a company car reducing the threshold for 40% tax which may have been overlooked.

With RTI HMRC advisers are informed of income each month this means whilst they perhaps can't tell you how much you have earnt they can check the tax side of things so when they say it is correct there is a good chance it is.

However as has been said before if the OP can post some figures, Month in Question, YTD and tax code we can try and explain why less income was received than expected.