Employed (PAYE) £900 Tax Bill !!! 4 week/24 year anomally

xylophone

You paid tax but not enough tax.

You had used all your tax free allowance by payment 13. You had also used up all the basic rate band.

However, in accordance with HMRC instructions, payroll gave you a tax free allowance for payment 14.

This means you owe tax of 40% of that allowance.

The balance of the salary should have been taxed at 40% but you paid only 20% - therefore you owe that 20%.

You will pay what is owed over the 20/21 tax year.

stash999

unholyangel wrote: »

Exactly - you paid the same as normal, you should have paid a lot more. Take what your w56 taxable pay was, multiple that by 0.4 and thats how much tax you should have paid. Now deduct what you did pay and allow about £4 for error (if the extra in your code is flat rate expenses at £100 then its likely £3.87 you need to add) and that should give you 903.17.

That works, I just dont understand why, a colleague has told me he has received a letter from HMRC & he owes £80 !! he does the exact same job as me but its very doubtful he earned the same at the end of the year, he doesnt really do any overtime.

stash999

xylophone wrote: »

You paid tax but not enough tax.

You had used all your tax free allowance by payment 13. You had also used up all the basic rate band.

However, in accordance with HMRC instructions, payroll gave you a tax free allowance for payment 14.

This means you owe tax of 40% of that allowance.

The balance of the salary should have been taxed at 40% but you paid only 20% - therefore you owe that 20%.

You will pay what is owed over the 20/21 tax year.

If my work had been clearer about this I wouldnt have done a minutes overtime that month.

chrisbur

stash999 wrote: »

If my work had been clearer about this I wouldnt have done a minutes overtime that month.

I do not know your exact figures but from the details you gave earlier I would guess that most if not all of your overtime fell in the part of your pay that was taxed at 40% ie anything over about £3573). Your pay for week 56 was given three tax rates the first bit was not taxed the next bit was taxed at 20% and the third bit (anything over about £3573) was taxed at 40%. The extra tax owed was caused by the first two bits the 0% and 20% the third bit at 40% had no affect.

Had you not done any overtime you would have had a lot less pay for that payday and the tax you owed would be the same or at least not very different.