Every year I have underpaid tax - Why can they never calculate correctly?!

schooleydoo

Good Evening,

I've just got home and like many others and received this years tax code.

Every year I get a wildly different code and I feel something's not right as a colleague of mine gets paid a similar salary yet (claims to) pay far less tax.

I usually call HMRC and they tell me everything is correct. This year, I'm looking for a second opinion as my tax code is now the lowest ever at K47.

My tax code is constantly changing (3-4 times a year) although my personal circumstances are stable. If I'm not changing, and HMRC aren't changing.... why do they find it impossible to figure out my tax code and leave me on it?! My tax code notification letter states that I still owe £1052 from an earlier tax year... every year I seem to owe them around this figure!

I have my P11D's, P60's and pay slips back to 2012 (when I started with my current employer) but to be honest it's never been clear to me. My concern is that my HR is getting things wrong and I'm paying for it.

If anyone is willing to shed any light, please let me know what info you require and I am happy to provide it. I'm not looking for exact figures but if someone could scan over the below and let me know if it looks "about right", it would put my mind at ease.

Basic P60 info is as follows:

2015
Pay - £32051
Tax deducted - £4940
Final tax code - 734L

2014
Pay - £29333
Tax deducted - £6068
Final tax code - K100

2013
Pay - £26000
Tax deducted - £4366
Final tax code - 267L M1

2012
Pay - 21514
Tax deducted - £2679
Final tax code - 811L

Tax code notification states:

Personal Allowance + £11000
Flat rate job expenses + £100 (I wash a uniform)
Less Car benefit - £6781 (2014 Mazda CX5. My private fuel is also paid for... Does this include fuel tax?)
Less medical insurance - £657
Less underpayment restriction - £4147
£485 to be added to your wages, salary or pension.

£485 is added to this income.
This totals your tax free amount -£485.

[Deleted User]

Hi,

had to google 'tax code K' and got this,

What does the letter k mean on my tax code?



Note: If your tax code is a letter 'K' followed by a number, this means that the total allowances in your code are less than the total deductions to be taken away from your allowances. In this case the number is added rather than deducted to determine the taxable income.

schooleydoo

Yes I have the same explanation on the letter.

So somehow, due my "underpayment restriction", my personal allowance is minus £485!

But I have no idea how I have underpaid tax by almost £4200, when every year they tell me I have underpaid and adjust my code accordingly.

Darksparkle

To check if you were underpaid you'd need your total pay and benefit details for the tax years, not just the P60 figures.

Car benefit doesn't include fuel benefit, they should be shown separately on your P11d.

polymaff

schooleydoo wrote: »

Good Evening,

I've just got home and like many others and received this years tax code.

Every year I get a wildly different code and I feel something's not right as a colleague of mine gets paid a similar salary yet (claims to) pay far less tax.

I usually call HMRC and they tell me everything is correct. This year, I'm looking for a second opinion as my tax code is now the lowest ever at K47.

My tax code is constantly changing (3-4 times a year) although my personal circumstances are stable. If I'm not changing, and HMRC aren't changing.... why do they find it impossible to figure out my tax code and leave me on it?! My tax code notification letter states that I still owe £1052 from an earlier tax year... every year I seem to owe them around this figure!

I have my P11D's, P60's and pay slips back to 2012 (when I started with my current employer) but to be honest it's never been clear to me. My concern is that my HR is getting things wrong and I'm paying for it.

If anyone is willing to shed any light, please let me know what info you require and I am happy to provide it. I'm not looking for exact figures but if someone could scan over the below and let me know if it looks "about right", it would put my mind at ease.

Basic P60 info is as follows:

2015
Pay - £32051
Tax deducted - £4940
Final tax code - 734L

2014
Pay - £29333
Tax deducted - £6068
Final tax code - K100

2013
Pay - £26000
Tax deducted - £4366
Final tax code - 267L M1

2012
Pay - 21514
Tax deducted - £2679
Final tax code - 811L

Tax code notification states:

Personal Allowance + £11000
Flat rate job expenses + £100 (I wash a uniform)
Less Car benefit - £6781 (2014 Mazda CX5. My private fuel is also paid for... Does this include fuel tax?)
Less medical insurance - £657
Less underpayment restriction - £4147
£485 to be added to your wages, salary or pension.

£485 is added to this income.
This totals your tax free amount -£485.

Your employer seems to be deducting the correct tax for the tax codes you quote from your P60s - but is he keeping up to date with the changes in coding (due to notifications of Benefit In Kind) you are being notified of? Try to track the changes you were notified of for the tax year 2015/16 with your pay-slips during 2015/16.

Incidentally, K47 is not as bad as K100

Gizmo247

Tax codes are usually based on the actual figures from 2 years ago + estimates. So your 2016/2017 tax code with be based on actual figures from 2014/2015. This is because the P60 and P11D for 2015/2016 won't get filed until after 6th April 2016.

Tax codes allow the government to collect tax upfront and then sort it out later via a P800 calculation. Only if salary and benefits remain static for 2 years in a row does the correct tax get taken upfront and no P800 is required.

schooleydoo

Gizmo, that explains why they are never able to accurately calculate and why my tax code has been changing so often (pay rises / bonuses / car changes).

Polymaff, assuming my employer was NOT keeping up to date with my benefit in kind... could it add up to £4147 of underpaid tax? It just seems an extremely high amount when they have already been claiming ~£1000 in underpayments annually.

polymaff

schooleydoo wrote: »

Polymaff, assuming my employer was NOT keeping up to date with my benefit in kind... could it add up to £4147 of underpaid tax? It just seems an extremely high amount when they have already been claiming ~£1000 in underpayments annually.

It's not £4147 of unpaid tax, but the tax on £4147* - but you answer my question first

Did your employer keep up with the 2015/16 tax codes issued?

Edit: *See the corresponding Note on the coding notice.

schooleydoo

It would appear I don't have the mountain of old pay slips I thought I did, I vaguely remember a cull a while ago. It's something I'm going to have to ask HR to give me a summary of tomorrow (whilst tactfully avoiding "why?"!)

Thanks for your help so far. I'll update with my findings!

polymaff

schooleydoo wrote: »

It would appear I don't have the mountain of old pay slips I thought I did, I vaguely remember a cull a while ago. It's something I'm going to have to ask HR to give me a summary of tomorrow (whilst tactfully avoiding "why?"!)

Thanks for your help so far. I'll update with my findings!

Well, this is the usual cause - and it is only going to get worse in 2016/17 as HMRC change tax codes more frequently to deal with Gross Interest Payments.

If you've at least got your final payslip for 2015/16, does it use the latest coding for 2015/16 you are aware of? Or the one before that? Or before that? That might give a clue.

CLAPTON

schooleydoo wrote: »

Gizmo, that explains why they are never able to accurately calculate and why my tax code has been changing so often (pay rises / bonuses / car changes).

Polymaff, assuming my employer was NOT keeping up to date with my benefit in kind... could it add up to £4147 of underpaid tax? It just seems an extremely high amount when they have already been claiming ~£1000 in underpayments annually.

sadly, in the UK, YOU are responsible for paying the correct tax
it would be worth your while, to be able to calculate your own tax : you can get plenty of help here.

your BIK are only known at a year end so there will always be an element of error

but if you post up the figures we can work out what you should be paying and what your taxcode should be.