Tax code rant (Why do HMRC get tax codes wrong?)

TrickyDicky101

Apologies - this is more of a rant than a question.

I complete Self Assessment every year - fair enough, I'm a higher rate tax payer.

Every single time I have some non-standard payment/expense/income HMRC ALWAYS adjust my tax code on the assumption it will be repeated next year (the only thing they haven't for is one off charitable donations - Yay! They get something right).

I then end up with higher/lower net pay the following month as my employer has (rightly) adjusted my tax code in line with what HMRC send them.

I then have to use the Government Gateway to send HMRC notice they've incorrectly adjusted my tax code and need to reverse the change.

Is there not some way I can tell them to keep a standard tax code for me for the following year?

I appreciate they think they are being helpful but in this current tax year my tax code (which should only ever be unadjusted 1185L) has swung from

K83 (this was an admitted mistake by HMRC)
2467L (!!!!!! Big Personal Pension payment using spare cash last year rolled forward to this year and won't be repeated again unless I win the lottery)

Pennywise

You have my sympathies. I have several clients with varying pension/gift aid contributions between years. We have the fiasco every year of HMRC adjusting PAYE codes once they receive the SA return, which we then have to contact HMRC to get them to return the tax code to the basic/simple personal allowance - it's a right pain. And no, there's no mechanism for HMRC to leave things alone - this is nothing new, it's happened for several years, if not more than a decade. We've written to them to ask them to put a "flag" on the record to leave alone, but they ignore it. We've phoned them to ask the same thing, but they say they can't. Just a lot of work for both ends for no reason. And then HMRC wonder why they're over-worked!

lindabea

Because HMRC employs a bunch of incompetent people!! There was a time when HMRC were professional, but sadly, not anymore. Sorry - can't resist answering your question.

TrickyDicky101

Thank you Pennywise - it makes me feel better that I'm not alone in being frustrated I am fortunate in that I don't spend everything I earn each month so that when they correct my code and thus I repay the tax that hasn't been deducted these last two months it won't put me on the breadline.

It's such a dumb-!!! system!!!

I feel better for getting this off my chest

chrismac1

See my other post on this subject from earlier this week. I just ignore daft PAYE codes in the 70 or so payrolls I run. But as you'll see from my posts the "doff your cap" brigade see that as dangerous heresy, and I can well understand why payroll staff would not entertain doing it.

TrickyDicky101

chrismac1 wrote: »

See my other post on this subject from earlier this week. I just ignore daft PAYE codes in the 70 or so payrolls I run. But as you'll see from my posts the "doff your cap" brigade see that as dangerous heresy, and I can well understand why payroll staff would not entertain doing it.

I read your original post and thought you applied a remarkably pragmatic approach - albeit one where you can potentially suffer as you allude (the less said about the idiot who replied on that specific point the better).

I am extremely frustrated by HMRC's approach to the tax code - but they seem to be completely immune to criticism and have zero incentive to improve any of their processes :mad:

vacheron

A few years back, when rates were good and savings interest was taxable, I used to have my tax code adjusted from self assessment to take account of the additional taxable savings interest.

They then sent me a letter telling me they would "not be asking me to do a tax return in future".

The next year I received a letter telling me that I had underpaid tax to the tune of £800 the previous year.

When I asked them to send their calculations it turned out they had just taken my previous years declared interest and added 50%, despite savings interest rates falling by about 40% that year.
They also reduced their assumptions for my pension contributions by 50% when I had increased them!

In the end, it turned out they actually owed me £1100 so they should have kept their silly assumptions to themselves.

What annoyed me most was the way the letter stated "you owe us" not "we think you may owe us", this would leave lots of people to assume it was clever information they had obtained rather than what turned out to be nothing more than illogical guesswork!

dori2o

HMRC simply can't win.

They use the latest information provided and they're wrong for updating tax codes.

They don't use the latest information and they're wrong for not updating tax codes.

Maybe its time HMRC stopped updating tax codes altogether and forced everyone to have an online account and leave it to the taxpayer to update them. Then it would be entirely down to the taxpayer who risks over/underpaying tax based on their own updates to the tax code.

badmemory

They actually can't win. They are using dodgy info from the DWP, they are using dodgy info from the banks. So no they can't win.


I have recently had a PA302 after they told me to stop filing self assessment.


State pension notified by DWP was almost £5 out (according to HMRC rules) so overtaxed by 90p. Untaxed savings out by over 90% ie £92 instead of £949. I rang up to notify of the savings difference as even though there is no tax to pay I am liable for the error, even though I didn't make it. Frankly couldn't be a****d correcting the 90p overtax. Their need is way greater than mine. After all if they make the same mistake next year it will save me £50. When they find out about that error inabout 20 years I won't be here & if I am at 92 it will be a pleasure to pay it.

Pennywise

dori2o wrote: »

HMRC simply can't win.

They use the latest information provided and they're wrong for updating tax codes.

They don't use the latest information and they're wrong for not updating tax codes.

The problem is HMRC "assumptions", not changes based on fact. Eg last year taxpayer has an unusually high income so makes an unusually high pension contribution. HMRC just "assume" the same pension will be made next year and adjust tax code. If HMRC had any sense, they'd realise the pension was linked to income levels, see from RTI that income was lower again this year and leave the tax code alone. The problem is HMRC do half a job - they make incorrect assumptions without looking at the whole picture. If they're going to assume, then they need to think what they're doing - otherwise they should just stick to hard facts. What is even crazier is that they don't adjust the tax code when some facts are known - i.e. they don't remove the personal allowance when rti submissions show income has already beached the £100-£123k threshold meaning they watch idly as tax is underpaid and then hit the taxpayer with a demand a few months later. Let's at least have some consistency - a good start would be them getting the tax code right based on facts before they start making assumptions and crystal ball gazing.

chrismac1

I agree it is a very difficult task. What annoys me is that when HMRC made massive, and costly, changes to the payroll system 4 years or so back they promised that the coding errors would more or less all be fixed. I said at the time this was drivel and I still say it is drivel.


Now in April 2019 we have a really daft IT project - Making Tax Digital (MTD) - being introduced at massive cost to the taxpayer and small businesses by HMRC. And the promises HMRC have made to Select Committees and the like about the benefits of MTD have been even dafter than for the payroll changes.


I just don't think it is OK for a tax authority to tell blatant lies like this, and push through all the cost and hassle on the basis of pure drivel.