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

lizzie201296

Hi. If anyone has seen my other post about workplace pension you will know my boss is a bit of a dodgy dealer when it comes to running a company so it won't surprise you that I have a feeling something has also been going on with my pay/tax.

I saw on my HMRC online account that I owe £713 in tax. When I phoned HMRC the guy was not very helpful and was super confusing (I don't know anything about how this all works) so I'm hoping someone here can explain it to me. He didn't really give me a reason other than something about my tax code being wrong and telling me to bring it up with my employer. I have asked my boss for my P60 but he's not very helpful so not sure when I'll get it.

Basically, HMRC says I paid too little tax in the 2019-2020 tax year. I changed jobs in August 2019. The guy gave me the details of my P60 over the phone and these are the figures they have:
Job 1: £9,548.75 (£926.40 tax)
Job 2: £21,569.57 (£2,179.80 tax)

When I look at my P45 from Job 1, the numbers all match, so I know it isn't them. When I look at my payslips from Job 2 and my actual pay from my bank statements, they don't match. The tax is the same (£2,179.80 when I add up the tax paid according to my payslips), but the pay is different - when I add up the net pay on my payslips (and the monthly pay I've been receiving into my bank accounts) it comes to £17,491.66. That's a difference of £4,077.91. Does this mean there has been an error somewhere? I don't get any sort of work benefits or pension payments. 

Ultimately, I have been receiving what I believe is the 'correct' amount of pay each month (ie. if I look up '30k after tax' I have been receiving the monthly net salary shown); it's not like I've been getting overpaid. So as far as I'm concerned any tax owed to HMRC has been going missing somewhere between my employer and me - I don't 'have it' if that makes sense?

I just want to check that I'm not being stupid and missing something here before I raise this with my boss. My feeling is that there was an error on the P60 - they told HMRC I earned more than I did in the 2019/2020 tax year, hence why HMRC thinks there is tax owed. Does this sound right? If so, what should my approach be? 

Any thoughts/help/advice would be greatly appreciated!

Comms69

Add up what you got paid, gros (ie before deductions) - £12,500 x 0.2 = tax owed.

I got it to 620ish owed. 

AskAsk

look at your last payslip for the tax year and see what it states as gross pay to date.  that figure should agree with what HMRC holds.

wiseonesomeofthetime

I get the impression your tax code is wrong, for whatever reason. Could be allowances added that should not have been, but I don't know.

Check your tax code for both jobs. They likely differ.

Like @Comms69, I make it you owe just over £617 to HMRC, based on a tax code of 125L.

Was your tax code higher than 125(letter) ?

zagfles

lizzie201296 said:

Hi. If anyone has seen my other post about workplace pension you will know my boss is a bit of a dodgy dealer when it comes to running a company so it won't surprise you that I have a feeling something has also been going on with my pay/tax.

I saw on my HMRC online account that I owe £713 in tax. When I phoned HMRC the guy was not very helpful and was super confusing (I don't know anything about how this all works) so I'm hoping someone here can explain it to me. He didn't really give me a reason other than something about my tax code being wrong and telling me to bring it up with my employer. I have asked my boss for my P60 but he's not very helpful so not sure when I'll get it.

Basically, HMRC says I paid too little tax in the 2019-2020 tax year. I changed jobs in August 2019. The guy gave me the details of my P60 over the phone and these are the figures they have:
Job 1: £9,548.75 (£926.40 tax)
Job 2: £21,569.57 (£2,179.80 tax)

When I look at my P45 from Job 1, the numbers all match, so I know it isn't them. When I look at my payslips from Job 2 and my actual pay from my bank statements, they don't match. The tax is the same (£2,179.80 when I add up the tax paid according to my payslips), but the pay is different - when I add up the net pay on my payslips (and the monthly pay I've been receiving into my bank accounts) it comes to £17,491.66. That's a difference of £4,077.91. Does this mean there has been an error somewhere? I don't get any sort of work benefits or pension payments. 

Ultimately, I have been receiving what I believe is the 'correct' amount of pay each month (ie. if I look up '30k after tax' I have been receiving the monthly net salary shown); it's not like I've been getting overpaid. So as far as I'm concerned any tax owed to HMRC has been going missing somewhere between my employer and me - I don't 'have it' if that makes sense?

I just want to check that I'm not being stupid and missing something here before I raise this with my boss. My feeling is that there was an error on the P60 - they told HMRC I earned more than I did in the 2019/2020 tax year, hence why HMRC thinks there is tax owed. Does this sound right? If so, what should my approach be? 

Any thoughts/help/advice would be greatly appreciated!

What about NI?

Job 2: 21569.57, over 8 months is  £2696.20 a month. NI primary threshold (above which you pay NI) was £719 last year. So NI of (2696.20-719)*0.12 = 237.26 a month, times 8 months is 1898.08, add to the 2179.80 tax deducted and that makes total deduction (tax and NI) of £4077.88. Which is 3p different to your actual deduction!

Your problem is you paid too little tax for some reason.

What were your tax codes in both jobs? Any other income, allowances, marriage allowance etc?

chrisbur

Can you give the following details from your last payslip
Taxable gross
Tax paid
Tax code
Tax basis May be shown as for example month 1 cumulative non-cumulative X 1 0 or domething similar
Taxable gross to date
Tax paid to date
Previous gross
Previous tax

lizzie201296

So my last payslip (Sept 2020) says the following:
Tax Code: 1250L
Payment Period: Monthly
Net Pay: £2,395.73
Basic Pay: £3,076.92
Tax Deducted: £407
Employee NI Contribution: £274.19
Gross Pay (year to date): £16,426.92
Tax Paid (year to date): £2,034.40
NI (year to date): £1,400.99
And along the bottom is says:
Total Payments: £3,076.92
Total Deductions: £681.19
Net Pay: £2,395.73

My last payslip for the 2019/2020 tax year (Mar 20) says the following:
Tax Code: 1250L
Payment Period: Monthly
'Calculated on a W1/M1 basis' (this doesn't appear on my current payslips?)
Net Pay: £2,470.88
Basic Pay: £2,500
Bonus: £700 (I got a bonus that quarter)
Tax Deducted: £431.40
Employee NI Contribution: £297.72
Gross Pay (year to date): £21,803.66
Tax Paid (year to date): £2,179.80
NI (year to date): £1,806.20
And along the bottom is says:
Total Payments: £3,200
Total Deductions: £729.12
Net Pay: £2,470.88

My P45 from my previous job, which I left in August 2019, says the following:
Tax Code: 1179L
Total pay to date: £9,548.75
Total tax to date: £926.40

My first ever payslip from Job 2 has the tax code 1179L (same as the one on my P45 from Job 1), but the following payslip goes to the 1250L tax code which I have been on since.

I don't have any other income, allowance, work benefits etc. The only thing I get is the occasional bonus (have only had this 3 times since I've been in this job), which shows on the payslip and gets taxed accordingly. Hopefully the above info helps? Let me know if there's other info I need to share! Thank you everyone for your help so far

lizzie201296

zagfles said:

What about NI?

Job 2: 21569.57, over 8 months is  £2696.20 a month. NI primary threshold (above which you pay NI) was £719 last year. So NI of (2696.20-719)*0.12 = 237.26 a month, times 8 months is 1898.08, add to the 2179.80 tax deducted and that makes total deduction (tax and NI) of £4077.88. Which is 3p different to your actual deduction!

Your problem is you paid too little tax for some reason.

What were your tax codes in both jobs? Any other income, allowances, marriage allowance etc?

The NI for that period comes to £1,898.11 according to my payslips.
If I include NI in the tax deducted for that period it comes to £4,077.91. Which as you say, is the difference between the amount HMRC was told I earned as my pay and the amount of pay I actually took home according to my payslips. Is that normal, that the P60 includes NI whereas your payslips/net pay doesn't? Sorry if I'm being dense I really don't understand these things 

lizzie201296

In case this helps:
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.

Benefits in kind

You paid tax on £468 of benefits in kind, but you should have only paid tax on the actual amount of £0.

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.

Your P11D form

After the end of the tax year, your employer tells HMRC the taxable amounts of all the expenses and benefits they have given you on a P11D form – if you do not have a copy of this form you can ask your employer for one."

...Does this explain anything?

zagfles

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.

lizzie201296

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...