Huge tax bill from HMRC which I don't understand. Help!

AskAsk

Job 2: £21,569.57 (£2,179.80 tax)

Gross Pay (year to date): £21,803.66
Tax Paid (year to date): £2,179.80

tax agrees, but the gross pay is slightly different between P60 and March payslip

chrisbur

Figures I use are rounded a bit to keep things simpler this will have very little affect on the answers.
If we look at your figures the P45 has gross 9548 and tax 926 
This appears to be issued in month 5 so at that point your tax allowance was 4916
Gross 9548 less 4916 is 4632 
20% of 4632 is 926
So P45 is fine as at month 5 
This means you have 7 months tax allowance left to use against your earnings in second job.
Small differance in code numbers and gross pay. May well be a small affect on tax but cannot account for the amount HMRC are after so ignore them for the moment.
Total gross in job 2 is 21803 and tax allowance for 7 months is 7297 so 21803 less 7297 is 14506 and 20% of 14506 is 2901
Tax to date on final payslip is 2179 and should be 2901 so have a difference of 722 tax under-paid.  

Your last payslip for the year appears to be correct but as it is on a month 1 basis it tells me nothing about the rest of the year.  It is one of your earlier payslips has has the answer.  Can you advise from each payslip the following
Taxable gross
Tax paid
Month number or date paid
Tax code

chrisbur

lizzie201296 said:

zagfles said:

Yes your P60 is gross pay before deduction of tax and NI.

Your problem seems to be there was an overlap between the two jobs, did job 1 pay you some pay late, eg accrual holiday pay, redundancy etc? Job 1 seems to be spread over 5 months and job 2 over 8 or 9 months?

Looks like the March payslip wasn't the final one of the tax year - it states £1806 NI whereas you said above it adds to £1898?

But I think the problem is the overlap plus being on a "month 1" tax code, you got at least 13 monthly payslips and if you're not on a cumulative tax code it won't work out the tax properly. Basically you got too much personal allowance as you had 13 or 14 payslips in the year it seems and a month 1 tax code will work on a 1/12 of the allowance per month.

OK...I think this makes sense, but what I still don't get is surely if I hadn't been paying enough tax, I would have been taking home 'too much' money each month? I've only ever taken home my expected post-tax salary at this job and the last, so if I wasn't paying enough tax at any point would my take-home salary not have gone up? Or am I being thick...

Unfortunately the problem with an overlap is that you have to pay more tax than you would expect because one or more of your payments will have had an extra tax allowance which you are not entitled to.  One of the reasons I am asking for the details of each month in my last post is to check the number of payments you have had, but I feel there may be more to this than just an overlap.  Seems strange that your tax code from the P45 was used but then you were put onto the emergency tax code.  It is usually the other way round.

zagfles

lizzie201296 said:

zagfles said:

Yes your P60 is gross pay before deduction of tax and NI.

Your problem seems to be there was an overlap between the two jobs, did job 1 pay you some pay late, eg accrual holiday pay, redundancy etc? Job 1 seems to be spread over 5 months and job 2 over 8 or 9 months?

Looks like the March payslip wasn't the final one of the tax year - it states £1806 NI whereas you said above it adds to £1898?

But I think the problem is the overlap plus being on a "month 1" tax code, you got at least 13 monthly payslips and if you're not on a cumulative tax code it won't work out the tax properly. Basically you got too much personal allowance as you had 13 or 14 payslips in the year it seems and a month 1 tax code will work on a 1/12 of the allowance per month.

OK...I think this makes sense, but what I still don't get is surely if I hadn't been paying enough tax, I would have been taking home 'too much' money each month? I've only ever taken home my expected post-tax salary at this job and the last, so if I wasn't paying enough tax at any point would my take-home salary not have gone up? Or am I being thick...

The problem is you're just looking at monthly pay. Tax works on annual pay. In at least one month you had pay from 2 jobs, you aren't entitled to 2 personal allowances. People that actually have 2 jobs usually get the allowance in on of the jobs and no allowance in the other so they pay tax on their entire earnings. In your case, you had an overlap where you got the personal allowance in two jobs.

chrisbur

zagfles said:

lizzie201296 said:

zagfles said:

Yes your P60 is gross pay before deduction of tax and NI.

Your problem seems to be there was an overlap between the two jobs, did job 1 pay you some pay late, eg accrual holiday pay, redundancy etc? Job 1 seems to be spread over 5 months and job 2 over 8 or 9 months?

Looks like the March payslip wasn't the final one of the tax year - it states £1806 NI whereas you said above it adds to £1898?

But I think the problem is the overlap plus being on a "month 1" tax code, you got at least 13 monthly payslips and if you're not on a cumulative tax code it won't work out the tax properly. Basically you got too much personal allowance as you had 13 or 14 payslips in the year it seems and a month 1 tax code will work on a 1/12 of the allowance per month.

OK...I think this makes sense, but what I still don't get is surely if I hadn't been paying enough tax, I would have been taking home 'too much' money each month? I've only ever taken home my expected post-tax salary at this job and the last, so if I wasn't paying enough tax at any point would my take-home salary not have gone up? Or am I being thick...

The problem is you're just looking at monthly pay. Tax works on annual pay. In at least one month you had pay from 2 jobs, you aren't entitled to 2 personal allowances. People that actually have 2 jobs usually get the allowance in on of the jobs and no allowance in the other so they pay tax on their entire earnings. In your case, you had an overlap where you got the personal allowance in two jobs.

I agree that there is a strong likelihood of some overlap here but the amount owing seems too high to me for this to be the only explanation.

Dazed_and_C0nfused

In view of what the op has told us below then maybe there is actually very little tax owed for the tax year everyone had been reviewing but the majority is from an earlier year?

We would really need the op to provide the full breakdown of their P800 or PA302 calculation letter to be sure either way.

On the HMRC site if I now click 'why you owe tax' it shows the following:

"HMRC used the following reasons to work out your tax calculation – those that caused you to pay too little are shown before any that would cause you to pay too much.

Tax from earlier year

This calculation includes tax you owe HMRC for an earlier year. This is shown in the adjustments section of your tax calculation letter.

chrisbur

Dazed_and_C0nfused said:

In view of what the op has told us below then maybe there is actually very little tax owed for the tax year everyone had been reviewing but the majority is from an earlier year?

We would really need the op to provide the full breakdown of their P800 or PA302 calculation letter to be sure either way.

On the HMRC site if I now click 'why you owe tax' it shows the following:

"HMRC used the following reasons to work out your tax calculation – those that caused you to pay too little are shown before any that would cause you to pay too much.

Tax from earlier year

This calculation includes tax you owe HMRC for an earlier year. This is shown in the adjustments section of your tax calculation letter.

May have some bearing on it and details would certainly help but using the OPs figures we have earnings of 31352.41 (21803.66 last payslip plus 9548.75 P45) with tax of 3106.20 (2179.80 plus 926.40)
Two tax codes 1179 and 1250 on either of these tax on 31352.41 would be in the region of 3800 not 3100

lizzie201296

Hi everyone, thanks for all the above.

I don't have a P800 or PA302 calculation letter - I only noticed this because it appears on my HMRC online account; nothing has arrived through the post.

I'm getting confused which details I need to give you - I've done the payslips from the 2019/20 tax year since I started at job 2 in a previous reply; do you also need the payslips from 2019/20 tax year at job 1?

Thanks!

Comms69

lizzie201296 said:

Hi everyone, thanks for all the above.

I don't have a P800 or PA302 calculation letter - I only noticed this because it appears on my HMRC online account; nothing has arrived through the post.

I'm getting confused which details I need to give you - I've done the payslips from the 2019/20 tax year since I started at job 2 in a previous reply; do you also need the payslips from 2019/20 tax year at job 1?

Thanks!

We dont need any details, you need to work it out now.

GROSS Pay - £12500 x 0.2 = Tax owed

lizzie201296

Hi all
I've actually just spotted something I overlooked re. tax codes. I've put below the tax codes for all of my payslips since joining Job 2 up until the end of last tax year, and the date of the payslip (they don't make reference to a month number, they just have 'payroll date' at the top, so I have put them in that order)

31 Aug 19: 1179L; Basic Pay: £2,603.66; Tax paid: £0 (??! - I did pay £226.16 in NI though...)
27 Sep 19: 1250L - 'Calculated on a W1/M1 basis'; Basic Pay: £2,500; Tax paid: £291.40
25 Oct 19: 1250L - 'Calculated on a W1/M1 basis'; Basic Pay: £2,500; Tax paid £291.40
05 Dec 19: 1250L - 'Calculated on a W1/M1 basis'; Basic Pay: £2,500; Tax paid: £291.40
25 Dec 19: 1250L - 'Calculated on a W1/M1 basis'; Basic Pay: £2,500; Tax paid: £291.40
25 Jan 20: 1250L - 'Calculated on a W1/M1 basis'; Basic Pay: £2,500; Tax paid: £291.40
25 Feb 20: 1250L - 'Calculated on a W1/M1 basis'; Basic Pay: £2,500; Tax paid: £291.40
25 Mar 20: 1250L - 'Calculated on a W1/M1 basis'; Basic Pay: £2,500; Bonus: £700; Tax paid: £431.40
Followed by:
25 Apr 20: 1250L; Basic Pay: £2,500; Tax paid: £291.40

So from the 25 Apr 20 the 'W1/M1' thing disappears. But how come it only appeared after my first payslip, and then stays for the rest of the year? Am I correct that this means emergency tax? (I should point out that we never got payslips monthly, my boss only gave me all of these in one go a few weeks ago after the millionth time complaining, hence why I never clocked any of this before...)

The fact I didn't appear to pay any tax on the August payslip is odd but surely that would only be about £300 owing?