Self Assessment

singhini

I'm having a rant - feel free to join in!

So, as we approach the start of a new tax year I received my PAYE coding in the post this week. It shows I owe HMRC £1,016 from a previous tax year (I received a company car part way through the year and my employer didn't notify HMRC)

I ring HMRC and explain that this figure needs to be removed as I did a Self-Assessment last year and my accountant has already taken the car/£1,016 into consideration.


HMRC lady looks up my tax return and says yes I think I can see that on the tax return but why did you do a Self-Assessment when we (HMRC) didn't ask you to do one? (I respond by saying I put a large amount of money into my SIPP so needed to do Self-Assessment to claim the 20% tax back aswell as taking the company car/£1,016 into consideration for which I recognise I owed tax on).


HMRC lady responds by saying I shouldn't just be doing Self-Assessments willy-nilly as it creates more work for them. I should ring and notify HMRC each time my circumstances change and they will manually update their system with the information.

I then respond by saying that's bonkers as no two tax years are exactly the same and therefore I would need to be constantly ringing HMRC, and also I wont know exactly what the true figure is for something until the tax year has ended (i.e. how much interest on bank account savings I've made, or how much gift aid I've donated, or how much I need to claim for using my home as an office - some months it might be £18 other months might be more or nothing at all, also how much I've earnt in dividend income etc......).

HMRC lady doesn't really respond to what I've just said but rather reads out a list of criteria that someone has to meet to qualify for Self-Assessment and tells me I don't meet the criteria. However she goes onto say that I will need to do a Self-Assessment for the tax year which is about to finish in the next 2 weeks because of the figures on the Self-Assessment I self submitted (something about the large amount of money put into the SIPP).

I end the call by saying thankyou for explaining that and yes I will do a Self-Assessment for the current year when it ends and yes next time I think about doing anything differently i.e. putting money into SIPP's I will ring them up and let them know.


I've come to the conclusion that as I want to do a Self-Assessment every year as I like to know that I have paid the correct amount of tax, I'm just going to ring them up around Jan/Feb each year and say that i'm about to put a large amount of money into a SIPP and can they activate my account as needing to do Self-Assessment (irrespective of the fact I may or may not be putting any money into a SIPP).


Or anyone got any advice on how else I can be recorded as needing to do Self-Assessment each year? (I'm uncomfortable not doing a SA as I like to know I have factually paid the correct amount of tax each year and as far as I can see it, this can only be done via SA when the tax year has ended).

Dazed_and_confused

By doing Self Assessment you do have some control over the outcome.

You seem to be in the system now so maybe just wait till next March and if you aren't due to be sent a return for 2019:20 then you can ask to be back in the system (using large SIPP contribution as the justification).

What was the outcome of the £1016 in your tax code?

Tom99

I have been helping a friend who had the same problem. They did a SA for 2017/18 because they had a capital gain.
When the 2019/20 Code arrived it says they will be collecting the tax on interest over £1,000 for 2017/18 in 2019/20 but this tax had already been paid via the SA return. Their online account showed 'you owe £xxx tax'.
It seems that there are two separate systems which don't talk to each other. You would think that there would only be one computer record of the tax actually paid in a certain year but it seems there are two!

Dazed_and_confused

There are two, PAYE and Self Assessment.

What exactly is the entry in the tax code?

HMRC do not collect tax on interest from one year in the tax code of a different year. But they do collect tax owed from one year in the tax code of a different year (but it wouldn't specifically be for interest it would be their overall tax underpaid).

Tom99

Dazed_and_confused wrote: »

HMRC do not collect tax on interest from one year in the tax code of a different year. But they do collect tax owed from one year in the tax code of a different year (but it wouldn't specifically be for interest it would be their overall tax underpaid).

If PAYE for 2017/18 is correct but you owe tax on interest over £1,000 then they will alter the tax code for 2019/20 specifically to collect this back tax on that interest.
They will also try to catch up by including in the 2019/20 code the tax on interest they expect you to owe for 2018/19 and 2019/20.

Dazed_and_confused

There is a lot of confusion on this and the pension forum about tax code adjustments and which tax year they relate so as examples three of the most commonly discussed subjects are,

Tax underpaid in code = this is collecting tax owed which can be from an earlier year (and could be principally a result of untaxed interest)

Interest in code = this is collecting tax due for the tax year the tax code relates to and no other tax year (but the interest figure used may be provisionally based on interest received in an earlier tax year)

Personal pension relief in code = this is allowing tax relief for the tax year the tax code relates and would never be allowing tax relief in respect of a different tax year (although the amount of tax relief allowed may be estimated based on pension contributions from an earlier tax year)

singhini

Dazed_and_confused wrote: »

By doing Self Assessment you do have some control over the outcome.

You seem to be in the system now so maybe just wait till next March and if you aren't due to be sent a return for 2019:20 then you can ask to be back in the system (using large SIPP contribution as the justification).

What was the outcome of the £1016 in your tax code?

Ah well, After speaking to said HMRC lady she said she would send out a new PAYE coding and remove the £1,016 (which arrived this morning and it has been removed).

What winds me up is that no two years are the same, for instance in this current tax year (finishing in 2 weeks time), I was made redundant back in July and only managed to get back into work in February i.e. 6 months unemployed. The new employer has given me a company car so this tax years car benefit will be a combination of two cars which is easier to do via Self-Assessment rather than ringing up every 5 mins trying to explain things over the phone. also due to unemployment I was not able to put much into my SIPP this year (PS I did tell HMRC I got a new car and wrote to them back in February and guess what, the PAYE coding sent out was based on the old car - Thankfully when I spoke to the lady at HMRC about the £1,016 i also mentioned the car situation again and she has also corrected that aswell). :beer:


PS I agree with you, I will hold fire and come Feb/March next year just ask to be back in the system via large SIPP contributions justification.

londoninvestor

singhini wrote: »

Or anyone got any advice on how else I can be recorded as needing to do Self-Assessment each year? (I'm uncomfortable not doing a SA as I like to know I have factually paid the correct amount of tax each year and as far as I can see it, this can only be done via SA when the tax year has ended).

It used to be that having any foreign-source income (apart from dividends below £300) would require you to complete an SA. So you could for example buy a few shares in an Irish-domiciled bond ETF (note bond ETF not equity ETF, so it pays interest not dividends) to meet the criteria.

The HMRC "check if you need to send a Self Assessment tax return" web tool however now implies that only foreign-source income above £300 total requires you to file a return. (i.e. the £300 criterion now applies to all foreign income, not only dividends) - so this may no longer work.