Taxed twice on employment benefits?

hammond_cheese

Hi all

I've come across similar questions to this asked before but haven't been able to find an answer that relates exactly to my situation. If anybody knows or has come across this before would be grateful for any advice (I imagine this is a relatively common situation).

I get medical insurance provided through my employer. It started in the 2017-18 tax year and I still have it. Let's say the value of the benefit is £1,000. I didn't pay any tax on this benefit during the 2017-18 tax year.

Last summer (after the end of the 2017-18 tax year) I received a PAYE coding change notice to say that my current (2018-19) personal allowance had been reduced by £1,000 so that I would pay tax on the benefit.

I'm now in the process of filling in a self-assessment return for 2017-18, and entered the £1,000 benefit from my P11d form. The calculation shows that I owe tax on the full amount of the benefit.

Both my employer and HMRC have told me that tax is paid on this benefit in arrears i.e. the reduction to my personal allowance in the current year is designed to pay for the benefit received in 2017-18. Doesn't this mean that I'm being taxed twice for the same thing?

I have tried speaking to HMRC about it but have been told different things by different people.

Thanks!

Dazed_and_confused

You have misunderstood (or been misled).

You are not being taxed twice on the same income.

Your 2017:18 Self Assessment return sorts the tax owed for that year.

The adjustment to your 2018:19 tax code is a provisional attempt to collect the tax due for 2018:19 only.

Your 2018:19 Self Assessment return will finalise the actual position for 2018:19 in due course (the tax code is just estimated based on what benefit was received in 2017:18, it could be more or less in reality for 2018:19).

You are also confusing your Personal Allowance with your tax code. Your Personal Allowance will only be reduced by either applying for Marriage Allowance or having income greater than £100k.

hammond_cheese

Thanks for your reply - that's helpful, and is what I understood to be the case before I was told differently by my employer.

That leads me to a further question though: my colleagues at work (most of whom do not need to fill in a self-assessment return - I only do because I have additional income from elsewhere) - had the same change made to their tax code last summer. So when would HMRC collect the tax due from their 2017-18 benefits if they aren't completing a return and it hasn't already been adjusted in their code?

BoGoF

HMRC will get round to sending them a calculation for 2017-18 for them if a P11d has been submitted.

hammond_cheese

Ok, fair enough. Just it seems like quite a time lag considering they sent out the first batch of PAYE coding change notices in around September (when they already had the P11d information submitted by our employer). I would have thought they'd have taken care of it all then, but I guess not.

Dazed_and_confused

There is a subtle difference between you and your colleagues.

You are filing your Self Assessment return after 30 December so any tax owed will have to be paid by 31 January.

Your colleagues outside of Self Assessment probably won't have to directly pay the tax owed. It will normally be collected by an adjustment to their 2019:20 tax code.

So they may have had a calculation but won't usually be sent an actual "demand".

hammond_cheese

Understood - makes perfect sense. Thanks!