Tax year 2012-13

WaxiesDargle

Thank you Jem for highlighting my memory block and for your help two years ago...I have since found the PAYE Notice for 2012-13 saying about the underpayment.

It says:


You owe £1197 from a previous year - by reducing your tax free amount by £5985 we expect you to pay at 20% on an extra £5985 this year, which should collect the amount you owe (£5985 at 20% is £1197 )

What I really don't understand, is that I should have received £600 tax relief back from the EIS investment, I actually received £210.40...a shortage of £389.60....why is this if the underpayment was paid by reducing my tax free amount that year?


If I hadn't have invested the £2000 in the EIS, would I owe HMRC £389.60?


Sorry if this sounds stupid but I really don't understand

WaxiesDargle

Thanks for your replies, I have spoken with HMRC and it's all sorted....nice chap...took forever to get through though

Dr_Teeth

WaxiesDargle wrote: »

If I hadn't have invested the £2000 in the EIS, would I owe HMRC £389.60?


Sorry if this sounds stupid but I really don't understand

Yes. From your posts in the other thread, it would appear that your income from each source is not static year on year.

Your K code is designed to collect all the higher rate tax due through your pension, but this relies on HMRC knowing exactly what you're going to get paid in the year. If you earn more than they thought you would, then the restriction won't have collected all the tax due, hence the shortfall.

jem16

WaxiesDargle wrote: »

Thank you Jem for highlighting my memory block and for your help two years ago...I have since found the PAYE Notice for 2012-13 saying about the underpayment.

It says:


You owe £1197 from a previous year - by reducing your tax free amount by £5985 we expect you to pay at 20% on an extra £5985 this year, which should collect the amount you owe (£5985 at 20% is £1197 )

What I really don't understand, is that I should have received £600 tax relief back from the EIS investment, I actually received £210.40...a shortage of £389.60....why is this if the underpayment was paid by reducing my tax free amount that year?


If I hadn't have invested the £2000 in the EIS, would I owe HMRC £389.60?

That would have been the case, yes. Your £600 relief was stated in the tax calculation you posted so you are getting it.

Sorry if this sounds stupid but I really don't understand

It's really all to do with your 2 separate income sources not being in higher rate tax on their own but your total income is. HMRC then have to make an allowance for what they expect to be in higher rate but it's not an exact science. You can get it closer to being correct by giving them an accurate picture of what you expect to receive in the course of a year. Do you do this each year?

I also note from your calculations that you do not have any savings interest income or dividend income listed. Do you not have any or did you not realise that you should declare it as you would have extra tax to pay being a higher rate taxpayer?

WaxiesDargle wrote: »

Thanks for your replies, I have spoken with HMRC and it's all sorted....nice chap...took forever to get through though

Perhaps you can tell us roughly what the reason is?

WaxiesDargle

Thanks for the replies and you are right, it's because I get a pay increment in my employment in August and by the April financial year this appears not to have been calculated, hence the overpayment, I do also get a CPI increase in my pension in April.

The only savings I have Jem are in an ISA...two student kids see to that

jem16

WaxiesDargle wrote: »

Thanks for the replies and you are right, it's because I get a pay increment in my employment in August and by the April financial year this appears not to have been calculated, hence the overpayment, I do also get a CPI increase in my pension in April.

You can always give HMRC a ring after August and update them on your expected income. They can then readjust your tax code and it should be a little better than an underpayment later.

WaxiesDargle

Thanks Jem, I'll be doing that from now on