Incorrect tax code

Gm5691

Hello there,
In mid December I started a new job, which meant I was paid by two separate organisations on 31 December. There was no overlap in employment. My old organisation used the tax code 1250L and my new organisation used the tax code 0T. My salary after tax from new employer for 3 weeks in December  was £2179 and I paid PAYE of £765. HMRC tell me that I owe an additional £600 as my personal allowance cannot be applied to two pay cheques, meaning I should have paid higher rate tax. I’ve tried querying this with HMRC a few times but they are insistent I owe the additional £600. I’d be very grateful for any advice.

Many thanks 

chrisbur

There may not have been any overlap in employment but if they both paid you on 31/12 then they both paid you in the same tax month so definitely an overlap of payments.  Judging from the limited details it certainly suggests to me that you should be paying more 40% tax on this combined salary than was taken but if you want an exact calculation you will need to advise from last payment old employer and first payment new employer....
Taxable pay to date
Tax paid to date

Gm5691

Many thanks for your reply. My annual salary is 54700, that hasn’t changed in transfer to new job. 

Details as follows: 
Old employer pay amount - 3712.15. This included a payment for untaken annual leave entitlement, so is not what my usual salary would be. I was taxed 1284.60.

New employer I was paid 2179.64 and taxed £765. HMRC see say I should have paid £1325 in total on this monthly salary. 

Taxable pay to date is 7785. I’ve taken this amount from my Jan payslip. Tax code has been revised to 587L to claw back the money HMRC say I owe. 

I’m of course very happy to pay if it is correct that I owe the additional £600 but just want to make sure that is correct. 

chrisbur

Gm5691 said:

Many thanks for your reply. My annual salary is 54700, that hasn’t changed in transfer to new job. 

Details as follows: 
Old employer pay amount - 3712.15. This included a payment for untaken annual leave entitlement, so is not what my usual salary would be. I was taxed 1284.60.

New employer I was paid 2179.64 and taxed £765. HMRC see say I should have paid £1325 in total on this monthly salary. 

Taxable pay to date is 7785. I’ve taken this amount from my Jan payslip. Tax code has been revised to 587L to claw back the money HMRC say I owe. 

I’m of course very happy to pay if it is correct that I owe the additional £600 but just want to make sure that is correct. 

Sorry not sure I can get the figures needed from this, the only taxable pay to date you give is 7785 which seems to low for old employer and to high for new employer.  You should have a payslip for the last payment ( or part 1a P45 will have same figures) from your old employer on which there are hopefully figures for taxable pay to date and tax paid to date these will be  the total taxable earnings and tax paid in this employment back to April.  Then from your new employer's payslip the same which as it is the first month should be the taxable gross and tax paid.  You give a gross figure for second employment but you say it is after tax it is the taxable gross that is needed.

Gm5691

Apologies, I think this is the information you need. I’m still waiting for P45 to come through but I have got the following from my p60.

Old employer - taxable pay (47,982.80) tax paid (7094.60).

New employer, taxable pay (7785.63) and tax paid (1667.60).

Many thanks for your help. 

General_Grant

Gm5691 said:

Apologies, I think this is the information you need. I’m still waiting for P45 to come through but I have got the following from my p60.

Old employer - taxable pay (47,982.80) tax paid (7094.60).

New employer, taxable pay (7785.63) and tax paid (1667.60).

Many thanks for your help. 

How do you have a P60 from your new employer?  Or perhaps that is just the latest payslip amount (two months).
The latest P60 from your old employer will be for the year to 5 April 2020.

chrisbur

Gm5691 said:

Apologies, I think this is the information you need. I’m still waiting for P45 to come through but I have got the following from my p60.

Old employer - taxable pay (47,982.80) tax paid (7094.60).

New employer, taxable pay (7785.63) and tax paid (1667.60).

Many thanks for your help. 

Your P60 will have your earnings for last tax year it is the earnings for this tax year that are needed
Earnings and tax for new employer are not the same as in first post and are not consistent with a tax code of 0T

Gm5691

I’ve spoken to my old employer and now have my P45. Total pay to date - 43189.29. Total tax to date - 7897.80.

l have looked again at the two payslips I’ve received from my new employer.  On my December 31 pay slip, the taxable pay is 3475.73 and tax paid is £765. HMRC said the tax I should have paid that month is approx £1384, which may well be correct.

For my January 31 payslip, the taxable pay is 4309.90 and I paid 902.60 PAYE, my tax code for this month was 587L. 

Many thanks again for your help. 

chrisbur

I actually make it about £625 tax underpaid.  I have worked the figures out using the HMRC calculator  here 
http://payecalculator.hmrc.gov.uk/PAYE0.aspx
but to keep the explanation simple each month you get an allowance on which you pay no tax then an allowance on which you pay 20% tax then you pay 40% tax.
For December your earnings from your old employer used up all your no tax allowance and all your 20% tax allowance so tax was due at 40% which on 3475 is 1390
You had 765 deducted as on 0T which meant another £625 is due.

This is being spread over your remaining months in this tax year and should be about right by your last salary if earnings continue in a similar pattern. 

Having two payments in one tax month is an occasional problem with changing employers and not something that PAYE can really handle all that well other than as here adjusting the tax code going forward.

Gm5691

Many thanks for your explanation, really helpful!