Underpaid Tax?

pcman1985

I have had a letter from HMRC that I have underpaid Income Tax by £52.40 for the last tax year. Also signed on to the online tax account and it says the same thing, so the letter is genuine.

I find this very strange as I have been in the same job for many years, always paid weekly on Thursdays (Friday if a bank holiday week). There has been no changes to my tax code for the whole year and my income did not reach the amount for 40% tax.

Tax Code was 1310M (have Uniform Allowance and the Marriage Allowance

P60 says
Taxable Income £17,215.53
Tax Paid £770.60 (looks like it should have been £823.00, according to the letters)

I'm certain the amount they say I owe, I actually do (I realize it's only a small amount - they can take it at ~£1 a week from next year, according to the letter)

I just wondered if anything could have caused this to happen, considering I have been in the same job for many years with no changes to the pay schedule, and no changes to tax code. Also there is no Week/Month 1 on my Tax Code either)

Dazed_and_confused

Were you paid 53 times during the 2018:19 tax year?

If so you received an extra weeks worth of tax code allowances and HMRC are now asking for the tax underpaid which results from this back.

Your employer hasn't done anything wrong, the correct thing for them to do in this situation is to give you another weeks tax code allowances so that your take home pay in "week 53" is the same as it would normally be. HMRC then sort out the tax you owe afterwards.

Code 1310M allows £252/week to be paid before tax is deducted.

So as a basic rate taxpayer you would owe £252 x 20% = £50.40 (plus the normal little bit most people on PAYE owe but don't usually have to pay back)

pcman1985

Dazed_and_confused wrote: »

Were you paid 53 times during the 2018:19 tax year?

If so you received an extra weeks worth of tax code allowances and HMRC are now asking for the tax underpaid which results from this back.

Your employer hasn't done anything wrong, the correct thing for them to do in this situation is to give you another weeks tax code allowances so that your take home pay in "week 53" is the same as it would normally be. HMRC then sort out the tax you owe afterwards.

Code 1310M allows £252/week to be paid before tax is deducted.

So as a basic rate taxpayer you would owe £252 x 20% = £50.40 (plus the normal little bit most people on PAYE owe but don't usually have to pay back)

Just signed onto the online tax portal, I've had a look and it's just 52 payments. Thank you for the suggestion though, could it also be something to do with when I got my bonus payment on the 51st payment?

This payment was £1065.92 gross and £162.80 tax. Naturally most weeks were between £250 and £350 gross.

BoGoF

Does your P60 indicate a week 53 payment.

As stated above the underpayment is what would be expected for a week 53 payment.

pcman1985

BoGoF wrote: »

Does your P60 indicate a week 53 payment.

As stated above the underpayment is what would be expected for a week 53 payment.

The P60 does have a number 53 after the Tax Code.

It says Final Tax Code with a box. In the box it has "1310M 53"
It could be that the 53 means a 53 week payment.

If so I am surprised that this has not happened to me before

BoGoF

That explains it then.

It won"t neccessarily happen every year. Should be the case that everybody at your work will get the same.

pcman1985

Thank you, so it looks like some people might be getting a surprise letter drop through their letterbox anytime soon. It was just a surprise to get one after being in the same job for 17 years, just glad it's only a small amount I owe.

chrisbur

A week 53 occurs on average roughly every five and a half years. It is caused by the fact that the tax year always ends on 5 April which usually occurs every 365 days or 366 for a leap year, but 52 weeks only uses up 364 days. The odd day or two builds up so that you need an extra week inserting to keep in line with the tax year. The rule is that if your payday falls on the fifth of April or in a leap year the fourth or fifth of April that becomes a week 53.
Similar for anyone paid every two weeks or every four weeks when you get a week 54 or 56.This has been happening for a long time but until recently HMRC ignored it for most people. A few years back they started not ignoring it and did ask employers to warn their employees about this happening when it occurred, probably not noticed by a lot of employers.
http://taxnews.lexisnexis.co.uk/TaxNewsLive/Members/BreakingNewsFullText.aspx?id=4350&css=1&xml=0

Last but one para of section headed "Week 53 payments"

pcman1985

Thank you, that definitely looks like what has happened then.

badmemory

There was a big stink a few years ago when lots of ASDA employees got additional tax bills because of this 53 week problem. It really is about time that all these dodgy/expensive systems that work out wages / tax for many companies are set up to deal with what after all is something which is pretty bog standard. It isn't like no-one knows that any particular year has 53 or even 54 paydays or 13 / 14 four weekly paydays. It isn't rocket science. A simple correction to their program would prevent this rubbish happening to lots of people. So those people running wages - pull your fingers out & give the people you are paying a break & stop them getting these bills that they have no reason to expect are due.

nick74

badmemory wrote: »

There was a big stink a few years ago when lots of ASDA employees got additional tax bills because of this 53 week problem. It really is about time that all these dodgy/expensive systems that work out wages / tax for many companies are set up to deal with what after all is something which is pretty bog standard. It isn't like no-one knows that any particular year has 53 or even 54 paydays or 13 / 14 four weekly paydays. It isn't rocket science. A simple correction to their program would prevent this rubbish happening to lots of people. So those people running wages - pull your fingers out & give the people you are paying a break & stop them getting these bills that they have no reason to expect are due.

But isn't the payroll software simply emulating what would have happen if manual deduction cards were used? It would really need HMRC to change the way the PAYE system works in order to resolve this. The payroll software companies can't do this on their own.