Opening a SIPP for 2015-2016 to reduce tax underpayment

Farcasting

on the K124 you'd be looking at 2396.11 tax


on the 818T code youd be looking at 2081.71 tax


so effectively when your employer paid you in October you should have paid £300 less tax however they've deducted no tax on your income. they should have took about £2081.71 and they've also gave you back £2251.66 so in October alone you underpaid by about 4k.


I have no idea how your employer has managed to mess it up this badly, but it looks like the 4k maybe correct.


I would possibly speak to your employer and query it and if its there error you can claim employer error and your employer may be liable to pay the tax.


did HMRC send you a tax code of the K124 or did your employer just change it without any notification.

djohnst

HMRC sent me a tax code notification in September which changed it to K124 which was then used in October pay then got another change notice from HMRC in October changing it to 818T which was used in November pay.

There is a note at the bottom of the K124 notice which says they ahve estimated my income this year to be above £120,000 and so my personal allowance has been removed. On the 818T notice received in October, they have revised that to 'in excess of 100k'.

Farcasting

djohnst wrote: »

HMRC sent me a tax code notification in September which changed it to K124 which was then used in October pay then got another change notice from HMRC in October changing it to 818T which was used in November pay.

There is a note at the bottom of the K124 notice which says they ahve estimated my income this year to be above £120,000 and so my personal allowance has been removed. On the 818T notice received in October, they have revised that to 'in excess of 100k'.

I'm literally baffled I have no idea how your employer generated that refund then. I can see HMRC's reasoning for sending a K124 code as you received a larger wage the month earlier (approx 10k so 10k*12 months being over the 120k ) so may have looked like you were going to exceed the PA. then it would have been reduced the following month as your earnings where lower (approx 7k) . however I have no idea how when your employer used the 818T they generated such a large refund as the difference in tax codes only equates to about £300.


Defiantly speak to your employer and query it

djohnst

Thanks very much for the help, really appreciated

MichelleUK

Can you post the previous pay and tax figures that show on your P60?

The reason I ask is because it appears that the YTD figures that were on your P45, that you gave to your new employer, only went up to Jul 15. Your old employer then made a final payment on 0T1 that taxed that whole payment, including some at 45%.

Eventually, HMRC should have sent new 'previous pay' figures to your new employer to get your YTD figures correct - checking the P60 will confirm if that happened.

djohnst

Looking at my P45 (issued 28/7/15) the values are as follows:

Total pay to date: £21,735.81
Total tax to date: £5,303.40

P60 reads as follows:

Pay in this employment: £61,995.15
Tax in this employment £15,020.75

Pay in previous employment: £15,988.00
Tax in previous employment: £6,039.85

Total pay for year: £77,943.15
Total tax for year: £21,060.60

Farcasting

djohnst wrote: »

Looking at my P45 (issued 28/7/15) the values are as follows:

Total pay to date: £21,735.81
Total tax to date: £5,303.40

P60 reads as follows:

Pay in this employment: £61,995.15
Tax in this employment £15,020.75

Pay in previous employment: £15,988.00
Tax in previous employment: £6,039.85

Total pay for year: £77,943.15
Total tax for year: £21,060.60

Looks like you employer was using the wrong previous pay and tax?
your p60 should mirror your p45 for prev pay and tax.


Total pay to date: £21,735.81
Total tax to date: £5,303.40
if these were your figures from your p45 but you employer has used these


Pay in previous employment: £15,988.00
Tax in previous employment: £6,039.85


that's why a refund would have been generated, if you passed your p45 to your employer I have no clue why they used different figures.

MichelleUK

djohnst wrote: »

Looking at my P45 (issued 28/7/15) the values are as follows:

Total pay to date: £21,735.81
Total tax to date: £5,303.40

P60 reads as follows:

Pay in this employment: £61,995.15
Tax in this employment £15,020.75

Pay in previous employment: £15,988.00
Tax in previous employment: £6,039.85

Total pay for year: £77,943.15
Total tax for year: £21,060.60

That explains most of your underpayment then as effectively £21,735.81 of earnings (and its related tax) dropped out of your PAYE earnings calculations.

As your new employer effectively gave you your full years tax code and 20% tax band, these earnings when added back in, will be taxable at 40%. So the underpayment is:

£21,735.81 @ 40% tax = £8,694.32
Less tax already paid of £5,303.40 leaves £3,390.92 underpaid. The rest of the difference is made up as described in Dazed and Confuseds previous post.

If you would like to know why, only your payroll department will be able to tell you where the previous pay figures came from each time that they made adjustments.

djohnst

Thanks for the help everyone - at least you helped me get to the bottom of the calculation!