'You have paid too little tax'

tomedinburgh

I received a letter from HMRC today saying I'd paid too little tax and I owed HMRC more than a thousand pounds.

This follows a similar demand last year for £539.80, which I'm currently paying off, and a smaller demand from the year before.

I've used the MSE tax calculator and I'm on the right tax code. I've raised a query with HMRC. But I was wondering if anyone else has received something similar?

I'd have thought my tax affairs were simple. Employment is my only income – ironically I'm a civil servant. I'm not a higher-rate taxpayer either.

Thanks

Tom

molerat

The notification should give some indication of where the underpayment came from. Only one job ? To be consistently receiving underpayment notices as a basic rate taxpayer in a single PAYE job is quite unusual.

xylophone

Is there not a calculation with the demand for payment?

Are you receiving any other income from elsewhere?

tomedinburgh

Thanks - yes only one job. Their working shows my income and taxes (which matches my P60) and then calculates the tax they think is due – leaving a shortfall. I've contacted my HR department about it too.

Just think it's odd – particularly for the Government itself – to get tax codes wrong.

tomedinburgh

No other income worth speaking of. The tax calculation has included £40 in untaxed interest and a deduction relating to charitable donations, which does confuse me – I don't know where those figures come from.

I was self-employed a few years ago, but as this demand is for the current year, I don't think that's relevant.

Anyway, thanks for your responses. It's just a bit vexing to come home and see unexpected tax demands, so I'll get to the bottom of it.

MovingForwards

It isn't just you who gets them!
One letter says I've underpaid about £500, another says I owe £200. I've rung HMRC and been assured the lower figure is right, but fully expect it to go tits up again now I've changed jobs.

Worst part is if I want to pay them to get it over and done with they don't take payment over the phone, it has to be done online.

BoGoF

You could always post the figures and tax code operated.

Do you have any benefits in kind?

tomedinburgh

Here's the reply from HMRC, which is the point I just give up and think, well someone brighter than me knows better:

You did not pay enough tax as you had tax relief for Personal Pension Relief (PPR) and gift aid payments in your 2017 to 2018, 2018 to 2019 and 2019 to 2020 tax codes and you did not pay any or enough tax at the higher rate.

The grossed up PPR amount in your tax code for all of the above years was £2480.

The net gift aid amount in your tax code for all of the above years was £170.

The amount of tax you owe for 2017 to 2018 is £539.80. The amount of tax you owe for 2018 to 2019 is £539.86. I have updated your 2019 to 2020 tax code to allow us to start collecting the right amount of tax going forward based on the current information held on your record. We have calculated that you will still owe approximately £539.60 by 5 April 2020. We aim to collect any balance due through your 2020 to 2021 tax code.

I am sorry that you received the conflicting message saying that you paid the correct amount of tax for 2017 to 2018. The reason for this is because we ran a further calculation for the year following untaxed interest details we received from Banks and Building Societies. As there was no change to the overall final position, the original calculation result is hidden from you on the online account. I am sorry for the confusion this has caused.

Please Check your PPR, gift aid and estimated income figures for the current year and contact us with any changes.

I believe this answers your question and hope you are satisfied with the response. There's no need to send a reply. But if you think there's something important missing, just ask another question about this below.

BoGoF

I am assuming that for 2016/17 you claimed tax relief for personal pension contributions and gift aid of X amount. HMRC would have assumed you would have paid the same going forward and adjusted your tax code accordingly on a provisionsl basis. It appears that you actually paid less than the provisional amounts in your tax code and therefore underpaid tax.

Without actual figures this is just an assumption.

unholyangel

tomedinburgh wrote: »

Here's the reply from HMRC, which is the point I just give up and think, well someone brighter than me knows better:

You did not pay enough tax as you had tax relief for Personal Pension Relief (PPR) and gift aid payments in your 2017 to 2018, 2018 to 2019 and 2019 to 2020 tax codes and you did not pay any or enough tax at the higher rate.

The grossed up PPR amount in your tax code for all of the above years was £2480.

The net gift aid amount in your tax code for all of the above years was £170.

The amount of tax you owe for 2017 to 2018 is £539.80. The amount of tax you owe for 2018 to 2019 is £539.86. I have updated your 2019 to 2020 tax code to allow us to start collecting the right amount of tax going forward based on the current information held on your record. We have calculated that you will still owe approximately £539.60 by 5 April 2020. We aim to collect any balance due through your 2020 to 2021 tax code.

I am sorry that you received the conflicting message saying that you paid the correct amount of tax for 2017 to 2018. The reason for this is because we ran a further calculation for the year following untaxed interest details we received from Banks and Building Societies. As there was no change to the overall final position, the original calculation result is hidden from you on the online account. I am sorry for the confusion this has caused.

Please Check your PPR, gift aid and estimated income figures for the current year and contact us with any changes.

I believe this answers your question and hope you are satisfied with the response. There's no need to send a reply. But if you think there's something important missing, just ask another question about this below.

You only get gift aid & PPR if you're a higher rate payer. You get the difference between basic rate & higher rate. The way it goes into your code, it allows you to pay more at 0%. But higher rate reliefs are limited to the amount of tax you paid at higher rate. Ergo, if you weren't a higher rate payer then you wouldn't have been entitled to the relief.

I think it confuses people because the difference between tax free and basic rate is the same as the difference between basic rate and higher rate.

It would also be confusing to you because the code you would have been checking it against would be wrong.