Simple assessment/salary sacrifice query

revendication

Don't know if anyone's able to offer any guidance on this...

I've received a demand from HMRC for supposedly unpaid tax from 2016/17 on medical insurance I have with my employer, which reads as follows:

Medical Insurance you paid tax on - £124.00
Your actual Medical Insurance - £502.00
You owe HMRC - £76.20

I got in touch with payroll, who explained this was a salary sacrifice - and that 'the way (the employer) processes taxable benefits is through the P11d, so it runs in arrears. Tax is deducted in the following year'.

So why have I already paid *some* but not all of the tax on that insurance? Furthermore if what they say is correct and 'tax is deducted in the following year' why are HMRC coming to me directly for payment? Won't I be taxed twice on this benefit?

NordicNoir

revendication wrote: »

Don't know if anyone's able to offer any guidance on this...

I've received a demand from HMRC for supposedly unpaid tax from 2016/17 on medical insurance I have with my employer, which reads as follows:

Medical Insurance you paid tax on - £124.00
Your actual Medical Insurance - £502.00
You owe HMRC - £76.20

I got in touch with payroll, who explained this was a salary sacrifice - and that 'the way (the employer) processes taxable benefits is through the P11d, so it runs in arrears. Tax is deducted in the following year'.

So why have I already paid *some* but not all of the tax on that insurance? Furthermore if what they say is correct and 'tax is deducted in the following year' why are HMRC coming to me directly for payment? Won't I be taxed twice on this benefit?

When you join a company, unless you tell HMRC yourself, they will only hear about medical benefits when your employer sends in a P11D showing how much your medical benefit was in that tax year, often many months later.

HMRC then assume that the benefit will be the same the following year and put that amount into your tax code. The problem then is that the first year was probably only a part year, so you underpay the second year. Is that what has happened to you, your tax code assumed that your medical benefit was £124 rather than a full year at £502?

To make matters worse, these types of underpayment are now collected in the tax year that they are discovered, rather than collected in the next.

HMRC send details of how the tax code is calculated, it is really important that you check it carefully, otherwise there can be some nasty shocks when they try to catch up!