Underpaid tax last year but repaying via PAYE - how does this affect self assessment?

woffle99

Hi,

Last year was the first year my earnings went over the £50,000 limit which means that, as my wife claims child benefit, I have to fill in self-assessment shortly and pay some of it back.

My question is, I already know that I paid too little tax in general last year (due to my company car changing and various other benefits that appeared on my p11d) but that obviously showed up on my P800 and is gradually being paid off this year by adjusting my PAYE tax code. How though will this affect my self-assessment?

When I fill in the self assessment no doubt it will show again that I paid too little tax last year, but will HMRC automatically know that most of it has already been repaid via PAYE this year or will I be asked to pay it back a second time and then somehow need to claim it back later?

I'd really appreciate it if someone who know about this stuff could tell me.

Thanks.

MDMD

Can you confirm which tax years you are completing a tax return for and which year you got a P800? You wouldn't normally get a P800 for any year you do SA.

If you have an amount in your tax code there are two boxes near the end of the return for the relevant year which ask for amounts that have been coded out.

woffle99

Thanks for taking the time to reply.

I got a p800 a few months back for tax year 2014-2015. This was before I registered for self assessment for the first time (once I realised I had gone over the £50,000 earnings limit) so I am about to fill in the self-assessment for 2014-2015.

I expect to have to pay back some, if not all, of my wife's child benefit for that year but I assume that, because everything else is handled via PAYE, that it won't ask me to pay additional tax for that year too (or at least that's what I'm hoping).

dori2o

woffle99 wrote: »

Thanks for taking the time to reply.

I got a p800 a few months back for tax year 2014-2015. This was before I registered for self assessment for the first time (once I realised I had gone over the £50,000 earnings limit) so I am about to fill in the self-assessment for 2014-2015.

I expect to have to pay back some, if not all, of my wife's child benefit for that year but I assume that, because everything else is handled via PAYE, that it won't ask me to pay additional tax for that year too (or at least that's what I'm hoping).

First thing to do is check with HMRC that they have cancelled the P800. It should have been done once the SA record was set up but this is one thing known to be missed unfortunately.

One thing that confuses me is the fact that you say the underpayment is being paid off by restriction to your tax code in THIS tax year.

Generally it is the case that an underpayment for the previous tax year would be collected from the start of the next available tax year after the assessment has been done. So for 2014/2015, the assessment would be done in the 2015/16 tax year and any underpayment collected via your code in 2016/17.

It is possible that the restriction in your code is collecting back a 'Potential Underpayment' (known as a PUP). This PUP would have been calculated following a tax code change in 2014/15 and may not therefore be for the full amount of the underpayment calculated.

So this is something else you need to discuss with HMRC.

If it is a PUP relating to 2014/2015 then there is a box on the tax return for you to show this and the system will take into account that you are paying off tax from 2014/2015 in a later year and give you a credit for that.

So, in terms of filling in your tax return, you obviously show your income details from your P60 and P11d, you also show how much Child Benefit the household received in 2014/15 (get a bank statement from that year and multiply the weekly amount by 52, or ask the Child Benefit office to confirm the amount if there was a change during that year, i.e. child added/removed from the award)

If the amount being collected back via your tax code this year is a PUP from 2014/15 then you show this also. The online return will bring up this box automatically and it asks if you have any tax due for 2014/2015 included in your tax code for 2015/2016.

If you intend to do the return on paper then you will need the supplementary page SA110 Tax calculation Summary Page, and you complete box 8 to show this information.

If doing the paper tax return, assuming you are still within the deadline to do it on paper (3months 7 days after the issue date shown on the front of the tax return form or 31/10/15 whichever is later) you will also need supplementary page SA102 Employment pages. This is where you will show your P60/P11d information.

HMRC will be able to confirm to you what the paper filing deadline is for you.

woffle99

Blimey - thanks for such a long and detailed reply - really appreciate it.

Looking at things again in the light of what you have said, I believe you are right and I was getting a bit confused by changing tax codes for this year.

The P800 does say that the tax will be collected during 2016, which I read as being 2015-2016, but I imagine does mean 2016-2017 (why can't they just say that I wonder - would make it a lot clearer!).

My tax code had changed (I received a P2 in July) but it now looks like that's because my company car changed in the middle of 2014/15 (one of the reasons for the underpaid tax) and they have caught up and adjusted it so that I now pay enough tax just for 2015/16 to cover it (the old tax code being based on the old company car details).

Sooo based on all of that, I understand that the P800 should be cancelled (which I had not realised - thanks) and, once I have done the self-assessement I should then be told I need to pay the underpaid tax from 2014/15 as well as repay child benefit from 2014/15.

That could be quite a sum (£2300 underpaid tax and possibly the whole £2400 child benefit). Am I right in thinking that, because it is over £3,000 then I basically have to pay it by bank transfer (I can't do it via PAYE during 2016/2017).

Thanks a lot.