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

badmemory

When they brought in RTI I know a couple of small businessmen who just dumped their employees. I'm now waiting to see what they will do when the VAT filing changes come in. As I file for one of them & he still hasn't let me file August 2015 this could get very interesting!

TrickyDicky101

So HMRC have adjusted my take code from the (crazy) 2467L to 530LX.

As noted above, I made a significant pension cont in the previous tax year that won't be repeated again so that needed to be reversed. I believed I should be on the standard (unadjusted) tax code of 1185L (it probably won't be exactly that due to certain allowances/taxable benefits but will as near as dammit).

So my income so far in 2018/19 has been see-sawing all over the place due to the various tax codes (the amount I am actually paid has remained constant).

When I use the online service to see how they have come up with my new tax code (that looks wrong to me) I get the following break down:

Personal Allowance................. £11,850
Prof Subs.............................. £365
Underpayment from prev yr..... (£669) === this is correct
Estimated tax you owe this yr... (£6,242)

(Resulting) Tax free amount......£5,304

It's the bit in red I don't understand - I agree I have underpaid in the current financial year (due to the wrong tax codes). But surely that will sort itself out if I have the corrected tax code of

11850 + 365 - 669 = 1154L

As the tax is determined on a cumulative basis, no?

Does the fact they have ascribed an 'X' on the end of the my amended code of 530LX explain this?

It is quoted by HMRC that:

"We’ll collect £1,539.20 from your taxable income before 5 April 2019. To do this, we’ve reduced the tax-free allowance in your tax code by £6,242 to collect this in equal amounts"

Does the X (in 530LX) effectively mean this will happen over the remaining months (of 2018/19) rather than in one cumulative hit if I was on 1185L (or 1154L)?

I wish HMRC would actually *check* with me before they action this stuff - I would rather they took it in one go so that I actually have a tax code I can understand at a glance.

Very irritated by HMRC and the total ****nuts that work for them

Wayne_O_Mac

Did you ask for the code for the remainder of this year to be on a cumulative basis? If you've gone from 2467L to 1185L then it'd take the whole amount back in the first available pay packet. HMRC generally don't do that unless specifically asked to because it can lead to people getting no pay for the month after tax (which doesn't help with their budgeting) or halfwit accountants / payroll providers disregarding the code because they think they know better.

In theory, the could have checked with you in advance, but in reality they're under-resourced and simply don't have the time to do this for everyone without delaying a resolution even further.

csgohan4

The problem is the HMRC leaves the calculations to tax software and assumes they are correct and they don't have enough staff to correct individually every query, it is a 1 size fits all software it seems.

TrickyDicky101

I did state (via my message to them when I was querying the 2467L coding) that my PA should be 1185L but I didn't qualify that with any acknowledgement that that would result in a correction in the next month when the new code was used (and I was OK with that). So I think you are correct Wayne.

It is very frustrating. Dealing with HMRC is not fast and certainly not efficient. My comment that they're all a bunch of ****nuts stands.

csgohan4

I wouldn't take it personally tbh, cus they don't with our tax,

Only problem is it takes 1 year to correct last years mistakes, leaving us out of pocket in the meantime and make up the shortfall for the mistakes HMRC makes. The making tax digital is only going to worsen things as it puts more administrative pressure on an already stretched service