PAYE

sfowler49

I am looking for some help regarding how PAYE is calculated.

Earlier this year I received a notification from HMRC that I hadn't paid enough tax for the year 2018/19.  My income rose significantly from November 2017 therefore I hadn't paid enough tax and also had to pay back child benefit that I received for my daughter.  This meant I got a significant bill which I have managed to pay off early, however I am due to submit another self assessment calculation (for some reason I have to do this even though I am not self employed) in January, this time for the tax tear 2019/20.

Can someone tell me whether or not the tax I paid in the year 2019/20 would have been based on my earnings in the year 2018/19?  If so this would mean I should have paid roughly the correct amount of tax and would not be liable for a significant charge.  I will still have to pay back child benefit as I only stopped this earlier this year.  I have been an employee since leaving school and have never had to submit tax returns before so I am a bit in the dark as to how the tax you pay is calculated.

Many thanks.

KatrinaWaves

Tax is based on your current years income, not the income of the year before. 

19/20 tax uses 19/20 income
18/19 tax uses 18/19 income

this should automatically adjust on PAYE. 

chrisbur

As usual the best answer regarding tax problems comes if you can give full details.  On the limited details here your income must have gone over 50000 for there to be an over-payment of child benefit.  An under-deduction of tax as well as a repayment of child benefit suggests either that your income was over 100000 (PAYE cannot deal with this and needs HMRC to make an adjustment) or there was some other problem.

AskAsk

on self assessment, which is submitted in arrears, the payment is taken in advance.  so yes, you would have already paid 2019/20, based on your earnings in 2018/19.  we have decided to defer the second payment for the tax year, which was due on 31 July, so if you have done the same thing, then you would have to pay that by 31 Jan as well.

sfowler49

Hi, yes income went over £50,000 but is certainly nowhere near £100k! I knew I would be liable to pay back child benefit, but I'd also received a letter regarding the underpayment of tax which stated they would take it directly off my salary.  Once I'd filled in the self assessment form which I had to do because of the child benefit, they stated they could not now take the tax back off my salary and it had to be paid in full.  The thing is, I accept the child benefit repayment but I do not administer my tax payments, this is done by my employer so to receive a bill like that was a shock as I assumed my tax was being taken correctly off my wages.  If as you state the tax to 2020 was based on my earnings in 2018/19 then I should be ok hopefully.

AskAsk

sfowler49 said:

Hi, yes income went over £50,000 but is certainly nowhere near £100k! I knew I would be liable to pay back child benefit, but I'd also received a letter regarding the underpayment of tax which stated they would take it directly off my salary.  Once I'd filled in the self assessment form which I had to do because of the child benefit, they stated they could not now take the tax back off my salary and it had to be paid in full.  The thing is, I accept the child benefit repayment but I do not administer my tax payments, this is done by my employer so to receive a bill like that was a shock as I assumed my tax was being taken correctly off my wages.  If as you state the tax to 2020 was based on my earnings in 2018/19 then I should be ok hopefully.

we file self assessment because we have PAYE pay and other income.  it sounds like you have been told to do self assessment because there was a problem with tax due in 2018/19?  Did you get other income as well as PAYE?

sfowler49

No, only income I have is my salary. The underpayment of tax was supposed to be taken back by adjusting my tax code for the following year, but when I filled in the child benefit overpayment they said they had to take it all back separately. 

AskAsk

sfowler49 said:

No, only income I have is my salary. The underpayment of tax was supposed to be taken back by adjusting my tax code for the following year, but when I filled in the child benefit overpayment they said they had to take it all back separately. 

so when you submitted your self assessment for the tax year 2018/19, did they state two payments in advance for the coming tax year 2019/20?  they normally ask on the submission if you want this taken from your PAYE if it is under a certain amount, or whether you want to pay it through your self assessment.

do you remember what you opted for when you completed your return?

sfowler49

No, when I submitted it the amount they came back with was well over what I owed for child benefit so I rang them to query it and they said it was too much to be able to take it directly from my salary. I wasn't given an option once I'd done the self assessment.

AskAsk

sfowler49 said:

No, when I submitted it the amount they came back with was well over what I owed for child benefit so I rang them to query it and they said it was too much to be able to take it directly from my salary. I wasn't given an option once I'd done the self assessment.

that was for the tax year 2018/19 so you would have had to pay that by 31.01.2020 as it was too big an amount to be fed through your PAYE for the tax year 2019/20.  However, as well as paying underpaid tax due for 2018/19, the self assessment process also as you to pay in advance for the tax year 2019/20, split into 2 instalments, one payable by 31.01.2020 and a second one by 31.07.2020.

did you see these two payments on your calculation sheet when you completed your self assessment?

sfowler49

No, and as I say I already get taxed off my normal salary, this was because my income jumped that I ended up paying less through paye. I've no idea why I have to go through the self assessment process, and would like to know if everybody who's had to pay back child benefit has had to do the same.