Can someone help me understand this

FireWyrm

I just dont know what is happening and I'm hoping someone can help me understand.

Back in 2012, I received money from the Insolvancy Agency up to the statutory amount. Unfortunately, the insolvancy practitioner only taxed me at 20% instead of the 40% I should have donated to the government. Fast forward to this year and I have received a notice of tax coding which says I owe them £343.87. No problem, I acknowledge this.

In the tax coding notice, it says the following :

"We previously told you that you owe £343.87 tax from an earlier year. To collect this, we have reduced your tax-free amount to £1482. We expect you to pay 20% tax on an extra £1482 this year and this should collect the amount due (£1482 at 20% is £343.87)."

My tax code is 851L (£8518 tax free).

I have just received my payslip for this month and it indicates that I shall be paid £2720.74. Last year, I was paid £2814 each month, so I am losing £94 a month. Last month, I received a bonus of £750 of which I was taxed 58%. As far as I can tell, if this carries on, I will lose £1034 (11 x £94) over the course of the year to the tax man, much more than the £343 I actually owe! I dont understand what is happening and what to do about it.

Can anyone explain? Can I pay the remainder of the £343 actually owed and return my tax code to 1000L like it should be?

In total, my salary for 2014 should be £45K with a potential £3K bonus which is obviously not something that is set in stone. I seem to be paying much more in tax over the year than I actually owe and I really cant do with losing this. I expected to lose about £30 a month to cover the unpaid tax, not nearly £100 every month.

Can anyone explain?

pjclar02

What tax code were you on last year?

jimmo

FireWyrm wrote: »

Can I pay the remainder of the £343 actually owed and return my tax code to 1000L like it should be?

Yes, and its almost certainly your best option.
Otherwise you have a number of complications to get through.
In the PAYE system a £750 bonus in April makes it look as though your salary if £750 per month more than it is.
On its own that will even itself out over future months.
On a straight £45k salary ( no pension deductions) you are a higher rate taxpayer but HMRC seem to think you are basic rate so the adjustment for the underpayment is collecting twice as much as intended.
Your take home pay reflects National Insurance as well as tax so does not give a sound basis for calculating anything. You need to give gross pay, gross pay for tax purposes, tax deducted and NI deducted before anyone can attempt a coherent explanation.

chrisbur

FireWyrm wrote: »

I just dont know what is happening and I'm hoping someone can help me understand.

Back in 2012, I received money from the Insolvancy Agency up to the statutory amount. Unfortunately, the insolvancy practitioner only taxed me at 20% instead of the 40% I should have donated to the government. Fast forward to this year and I have received a notice of tax coding which says I owe them £343.87. No problem, I acknowledge this.

In the tax coding notice, it says the following :

"We previously told you that you owe £343.87 tax from an earlier year. To collect this, we have reduced your tax-free amount to £1482. We expect you to pay 20% tax on an extra £1482 this year and this should collect the amount due (£1482 at 20% is £343.87)."

My tax code is 851L (£8518 tax free).

I have just received my payslip for this month and it indicates that I shall be paid £2720.74. Last year, I was paid £2814 each month, so I am losing £94 a month. Last month, I received a bonus of £750 of which I was taxed 58%. As far as I can tell, if this carries on, I will lose £1034 (11 x £94) over the course of the year to the tax man, much more than the £343 I actually owe! I dont understand what is happening and what to do about it.

Can anyone explain? Can I pay the remainder of the £343 actually owed and return my tax code to 1000L like it should be?

In total, my salary for 2014 should be £45K with a potential £3K bonus which is obviously not something that is set in stone. I seem to be paying much more in tax over the year than I actually owe and I really cant do with losing this. I expected to lose about £30 a month to cover the unpaid tax, not nearly £100 every month.

Can anyone explain?

As has been suggested you need to give details of the wages to see what is happening but to start with "this should collect the amount due (£1482 at 20% is £343.87)" 20% of £1482 is £296.40 which if collected over 12 months would add just under £25 to your tax each month, though as you pay some 40% tax it would add about £50 which would agree with the net of £2720 assuming a gross of £3750 (£45K/12). Your figure for last year of net pay £2814 does not seem correct so I would suggest that you give the full details for the month when you received £2814 for a gross of £3750, along with full details for the month before that.
You say " I received a bonus of £750 of which I was taxed 58%" This seems unlikely so again I would suggest that you give full details for this month.

Details to give are tax year, taxable gross, tax paid, tax code and basis, month number, taxable gross to date and tax paid to date.

FireWyrm

Thanks very much for the information. Here are the calculations you asked for.

March 2014 :

Gross : £3750
PAYE : 592.40
Nat Ins : 342.88
Total : 935.28

March was the end of year, so here are the TO DATE values
Taxable : 40525 (I had a baby last year)
Tax : 6215.20
Nat Ins : 3695.29
Tax code : 944L
Net Pay : 2814.72

Payslip April 2014 :
Salary : 3750
Bonus : 750
PAYE : 984.91
Nat Ins : 359.34
Total : 1344
Tax Code : 851L
Net Pay : 3155.75

Payslip May 2014
Salary : 3750
PAYE : 684.92
Nat Ins : 344.34
Total : 1029.26
Tax Code : 851L
Net Pay : 2720.74


Now, I acknowledge the £343 payment (not happy, but understand it needs to be paid) but it seems harsh to me that I will have to endure a pay cut of over £1000 a year for the next year to pay back £343 that I actually owe.

Do the figures above help?

getmore4less

HMRC calculator
http://payecalculator.hmrc.gov.uk/PAYE0.aspx

getmore4less

The April May for this year are right,


The March for last year may have been lower tax if you had needed adjustment for end of year.


a normal 1month tax would have been £653.71 not £592.40

FireWyrm

getmore4less wrote: »

HMRC calculator
http://payecalculator.hmrc.gov.uk/PAYE0.aspx

OK, so the calculator agrees with the payslip, that's fine. What I dont understand is why I was getting £2814 per month last year, but only £2720 this year. I only owe the tax office £343 all told and therefore, logically, I should only be losing £30 a month give or take. Why am I losing nearly £100 a month?

FireWyrm

getmore4less wrote: »

The April May for this year are right,


The March for last year may have been lower tax if you had needed adjustment for end of year.


a normal 1month tax would have been £653.71 not £592.40

Here is Feb 2014 :

Gross : 3750
PAYE : 592.60
Nat Ins : 342.88
Taxable to date : 36885.78
Tax paid to date : 5622.80
Nat Ins to date : 3352.41
Tax code : 944L
net : 2814.52

I'm sorry GetMore4less, I still dont understand what is happening and why. Have they taken all the £343 I owe in the first few months? Will it even itself out, or will I continue to pay £94 a month extra in tax until April next year?

getmore4less

My normal march 2013-14 is wrong.

getmore4less

Do the tax again calcs with a 1000 code that will show you how much extra you are paying.


April £834 £985 -£50
May £736 £685 -£50