Over-exaggerated income by employer - help please?

mb86

Hello all,

I was wondering if anyone has any advice for the following please. A little out of my depth and aware that time is key.

In July, my employer changed trading name. I handed my notice in recently and am currently on gardening leave for another 2 weeks. After handing my notice in, I received an email from HMRC saying my tax code had changed. Having looked at my tax account, I can see that the new trading company has grossly exaggerated my expected earnings (3x) for this financial year and this is in addition to the expected earnings from the previous trading name.

I have called HMRC regarding this error and they have stated that I am in line for a hefty tax bill as according to the numbers, I will have underpaid tax. They have said the employer should have issued a P45 following the change in trading name which would have reset my tax allowance. Furthermore, no payslip has been submitted to them for August and the September payslip was 25% higher than what I was actually paid.

I don't regularly check my payslips as I presumed all would be in order (lesson learned) so have tried to access them online only to find my account has been disabled by my employer. I am in the process of requesting hard copies to cover the entire financial year (if this is even possible) but am at a loss as to the next steps or how to avoid an unrealistic tax bill.

The HMRC have said they will inform my employer of this mistake but I would appreciate any advice please. Is there cause for concern here? Am I worrying for no reason? Are there any steps I need to be taking? Thanks in advance!

dawyldthing

Type your yearly annual salary into listentotaxman.com

If your not sure (if it varies) might be worth putting each months in and seeing what tax should be paid. If they’ve not taken enough out they will send you a bill though

TBagpuss

It may not have been your employer. We had a similar issue when we changed payroll co - HMRC failed to follow their own procesess which meant that some (but not all) of our employees were showing as having jobs (both with us!)

HMRC then automatically 'assumes' that you are earning huge amounts in the 'new/second' job. I assume that this is so that if you have done something wrong, it gives you an incentive to put it right.

Unfortunately when it is their mistake it's more of a problem and harder to fix.

When our HR and accountants were trying to get it sorted HMRC at one point told us we should issue everyone with a P45 and start over, which apparently makes it an easy fix for HMRC. We declined to do this as it would be inaccurate, as everyone had continuous employment and we were concerned that it could create further complications down the line if anyone needed to prove length of service etc.

HMRC then admitted that it wasn't the correct way to fix things, just the easiest or them.

I don't know whether the same applies but I would not have thought that a change of trading name would automatically mean a P45 needed to be issued, unless there were other changes as well.

You may need to liaise with your former employer as HMRC may well try to pass the buck and blame them, even if it is HMRC which has made the errors and needs to fix it.

(and even if it is your employer who has messed up, liaise with them and ask them to copy you in on everything they send to HMRC, so you can get it fixed.)

Also, HMRC will not talk about your tax account to your employer, so you are likely to need to work with your former employer so you know what you need to provide or confirm or request.

I can't think of any reason why your employer would overstate your income, as that would mean that they had to pay extra tax and NI on your behalf , and probably pension contributions as well, so I think it is most likely either a mistake on their part, or a mistake on HMRC's part.

Ask your employer to provide you with duplicates of your pay slips andP45 if you don't have the originals, but this is so similar to what happened with us that I think what happens is that either your employer didn't follow the correct procedure to update the details with HMRC (in which case, both you and they will need to do so so HMRC can correct the records) or they did follow the correct procedure and HMRC failed to implement the change correctly and then applied penalties.

We ended up having to make a formal complaint to HMRC at which point they agreed to revert our employees to their original (correct) tax codes and not to seek any penalties until things were sorted out, but it took well over a year before they had finally corrected everything, even though they admitted fairly early on that we had done everything correctly and that they had simply failed to remove the old payroll details when the input the new ones.

I think it was all to do with the fact that everything is done via their portal these days, and it obviously doesn't work very well.

If you are in contact with any of your former colleagues, ask if they have the same problem.