Self assessment large tax bill question

dori2o

zygurat789 wrote: »

And the tax deducted?

It should have been deducted using the tax code 0T. OP can you confirm that this was the case?

zygurat789

dori2o wrote: »

It should have been deducted using the tax code 0T. OP can you confirm that this was the case?

Was the tax deducted on the P45 entered on the tax return!!!!

dori2o

zygurat789 wrote: »

Was the tax deducted on the P45 entered on the tax return!!!!

Good point. Do check this with your accountant.

dori2o

Watchful wrote: »

OK. I've been looking into this, and i think I've worked it out and panic is over.

My tax code was 1530L, when the accountant said it should be 32T. I think this might be due to some employment related expenses which changed with the new job - I had several £k of expenses to claim before.

The P45, despite what I said, was not correct. There was an arrears payment made to me after I left and this was declared on the tax return, but I had forgotten about it.

I've also found enough spare funds/interest free credit to cover the payment, so no panic about getting funds from stock brokers in time, or anything like that.

I guess this is just one of those artifacts of the peculiar "reduction in personal allowance" tax band. You'd expect with PAYE that a major tax bill would be unlikely, but it appears with this silly tariff that you need to pay close attention to your expected earnings, and contact HMRC regularly otherwise you may substantially underpay tax.

Thanks for all the help.

It has always been the case that each individual is responsible for their own tax affairs, whether they are PAYE or Self Assessment, so yes you are right, if your income is anywhere close to the £100k limit where personal allowances start to reduce, then you do need to keep an eye on what your expected end of year total income is likely to be and if necessary call/write to HMRC.

Did you have any job expenses in 2013/14 or due to the change of job did you not have any at all?

This is not a reflection on you OP, more towards your accountant, but it really does annoy me that the first thing that was said regarding the reason for the underpaymemnt, was that 'HMRC had made an error with my tax code for last year'.

Now I know there are a few accountants etc on this forum who like to come on here and bleat about how bad HMRC staff are,a nd consistently blame them for anything that goes wrong, but on this occassion it does seem as though HMRC have acted correctly.

I'm happy to see you have it sorted now OP, but Zygurat789 says do make sure you chack that all tax already paid at source from you PAYE income has been accounted for in the calculation.

chrismac1

Overall this thread is good example of why leaving tax returns until January is a bad idea. Even if the accountant's explanation is true - and it appears not to be, albeit it is staggering just how many tax codes HMRC muck up - there is no way I would leave a client in your income bracket until January.

There are just too many variables. Of course if the client, despite letters, decides to wait until January to drop off their records there is nothing else to be done. I had 4 such clients this year out of 140 or so SA returns to do.

Mind you I charge 50% extra for clients who first bring their source records to me after 31 December. Most folks only need one of these charges - to realise that I meant it when I said "contract variation" - to improve things in later years.

purdyoaten

chrismac1 wrote: »

Mind you I charge 50% extra for clients who first bring their source records to me after 31 December. Most folks only need one of these charges - to realise that I meant it when I said "contract variation" - to improve things in later years.

So did I - but many never learned. Even today on this forum there are some who are 'having a go' with no idea of what they are doing with even less idea whether the bill at the end is anywhere near correct.

Watchful

Hi guys. Thanks for all the helpful advice.

The pay advice from the first employer doesn't say what tax code was used. I just got a letter and a cheque. The letter just said what the gross was and how much tax was deducted. It works out at 20%, so I'm guessing that they just deducted basic rate.

The lateness of the current tax return is a long story (due to complications with the SE partnership income, change of accountants, etc.), but my current accountants had all my personal paperwork by June. I guess they'd scheduled the tax return until after the SE documentation came in (and that was very delayed, because I didn't get the paperwork through to my personal accountants until last week - guess why I changed accountants).

Spidernick

If the code is way too high then the OP would have been paying significantly less tax than previously. Wouldn't this ring alarm bells for most people if there were no other significant changes? As others have said, the responsibility lies with the individual most of the time. Did the OP not receive this new code? Did he/she not check it? I don't think it is just HMRC who are to blame here.

Finally, is OP saying that they earn £100K to £120K (the 60% tax band) and still receive overtime?! Wow! We don't pay overtime at my place for new graduates starting on £22K or so!

Watchful

The code on my pay slips is different to the tax code on my coding notice - it's a lot higher. The employer has not applied the code from Aug 2013 when my 2012/13 return was submitted, and has carried on using a 2011/12 code when my allowable expenses were much higher.

The coding calculation looks right, but I hadn't anticipated that a new tax code would be needed if my PAYE income went above £100k, because otherwise the PAYE system can't cope with income in this range.

So it looks like it's a whole bunch of circumstances, employer using wrong tax code, etc.

Pennywise

dori2o wrote: »

This is not a reflection on you OP, more towards your accountant,

Only if the OP kept their accountant involved throughout the year as to what they were earning!

As for HMRC being blameless, surely one of the "benefits" of RTI often trotted by out HMRC to justify the costs of hassle of RTI was that they would have live information every payday so could keep on top of things to help avoid large under/over payments?

So, according to Dori, HMRC who had the information every payday, are blameless, but the accountant, who probably only saw first sight of the P45s etc a few weeks ago is at fault.

Priceless!