Self-Assessment Tax Return - £5.5k tax bill...

danc787

Hi All
I pay tax via PAYE but am required to fill in a self-assessment tax return and have been hit with a £5.5k bill for 19/20. I suspect this is down to my employer not getting PAYE right for lots of reasons (salary near personal allowance reduction level and variable bonus taking me up a tax band).
I have ran the number and it appears correct, so I'm ready to pay up but it's a painful surprise to start 2021 with! - Is there anything I can do here or it just a case of my employer/PAYE not able to handle variable income accurately? - I was keen for second opinion(s) before I pay such a significant amount as a lump sum.
Any advice appreciated, cheers
Dan

[Deleted User]

Difficult to do anything without some figures. However, it is not your employer’s responsibility to reduce your tax allowance if that is part of the issue, That is down to you and the taxman.

Dazed_and_C0nfused

Not sure why you think this is down to your employer?

Your tax code is your responsibility to check and ensure you advise HMRC if it needs to be updated.

Chances are with that amount you have adjusted net income well in excess of £100k and have lost most if not all of your Personal Allowance.

You would be well advised to review your current tax code sooner rather than later.

danc787

Thanks for responses, appreciated. I do monitor my tax code, the issue is I have a variable bonus (say salary £100k, bonus £50k). The bonus is decided in Feb and paid in March just before end of the tax year (and could feasibly have been £0), so at that point I've already paid 11 months tax through PAYE with no sight of what the bonus will be (and hence PAYE is presumably  based on a guess of total income for the tax year).
I think conclusion is with a variable bonus paid late in the tax year, and total income on the threshold of the personal allowance reduction levels and higher tax rate band, that I've been under-taxed, self-assessment therefore corrects this and I need to pay up the lump sum by 31 Jan?...

[Deleted User]

Yes. What was your tax code? If it was 1250L that means that you had 12500 of personal allowances which you shouldn’t have had. Alone that makes £5000 underpaid as that 12500 should have been taxed at 40%. Is that likely to be the case this tax year also?

danc787

Yes, 1250L/ 0, and yes I suspect for 20/21 I'm on a similar path though I noted my tax code changing to 276T a couple of months ago so PAYE may be adjusting to this.
I'll get it paid up, lesson learned. I guess I just need to ensure I set aside around this amount and be aware the extra amount will need to be paid at tax return time each year.

[Deleted User]

I would suggest filing your tax return as soon as possible after receiving your P60 to have as much notice as possible of your liability.

Grumpy_chap

For the future, when you receive the bonus in March, put half in a deposit account so there is more than enough to pay the associated tax.
Avoid the stress by doing the tax return as soon as you receive your P60 and P11D.

Jeremy535897

I don't know whether you have any scope to pay money into a pension scheme? On earned income between £100,000 and £125,000, the marginal tax and NI rate is 62%.

danc787

Thanks folks, all very sensible suggestions to avoid the surprise this year. Particularly the pensions point, I'm still a way off retirement and pay max matched contributions but sounds like its definitely worth me going a bit further. Appreciate everyone's help. 

macman

Could your employer not be persuaded to pay the bonuses after 6/4/xx?