Wrong annual taxable income reported by company

foreveralone

Hi!
Checking my wife's finances we noticed in tax.service.gov.uk that the details provided by her company were wrong in terms of annual taxable income. The company was reporting 105k when she was projected to be making after bonuses and such around 180k.
After updating the annual taxable income value, her tax code changed to something like K1055X and the website reported the following:
Your tax-free amount

The income you can have, taking into account any adjustments, before paying tax.

The amount is

−£10,000

What caused this? Did she enjoy tax free allowance she now has to return? How does this tax code work on next payslips?

Thanks

Dazed_and_C0nfused

Her adjusted net income increasing will mean she loses her Personal Allowance.

Is the bonus yet to be paid?

The tax code will have been issued on a non cumulative basis so only applies going forward, what has been paid earlier in the tax year won't be considered.

Any tax owed above what is paid on PAYE will be sorted when she completes her Self Assessment return.

foreveralone

Dazed_and_C0nfused said:

Is the bonus yet to be paid?

No, they have all been paid.

Dazed_and_C0nfused said:

what has been paid earlier in the tax year won't be considered.

What does this mean exactly?

Dazed_and_C0nfused said:

Any tax owed above what is paid on PAYE will be sorted when she completes her Self Assessment return.

Does it mean she will have to pay 10k?

Thanks for all you help

unholyangel

When you say reporting, do you mean the RTI submissions they have made for her so far? Or is this an estimated salary figure, that they ask for on her online account? 

If the latter, it's normally not from the employer but an estimate based on what they've earned so far. 

Does your wife sacrifice any salary or have benefits in kind? What was her previous tax code? 

foreveralone

unholyangel said:

When you say reporting, do you mean the RTI submissions they have made for her so far? Or is this an estimated salary figure, that they ask for on her online account? 

That's what tax.service.gov.uk was mentioning. When accessing the update estimates section, the website was stating something like your company reported you are making 105k. And that's why we decided to update it to a more realistic figure.

unholyangel said:

Does your wife sacrifice any salary or have benefits in kind? What was her previous tax code? 

Just pension, as far as I know. In terms of previous tax code, I don't remember exactly but it had the K in it.

Notnewnotold

BIK or savings interest would be my guess if there's a K code as it's not just a case of losing the personal allowance, she's now deeply into negative territory - based on that tax code, she will be paying higher or additional rate tax on a further £10,550 of income. Which will be tax due from savings interest or BIKs (probably) that HMRC are collecting through coding rather than just asking for a direct payment...

By the way, if HMRC really do think that earnings are 105k then your wife probably has an even less favourable K code to come once they have the right information

foreveralone

Notnewnotold said:

By the way, if HMRC really do think that earnings are 105k then your wife probably has an even less favourable K code to come once they have the right information

What do you mean exactly by that?

Notnewnotold

foreveralone said:

Notnewnotold said:

By the way, if HMRC really do think that earnings are 105k then your wife probably has an even less favourable K code to come once they have the right information

What do you mean exactly by that?

I mean that if they think she's only earning 105k, then they would not have removed all her personal allowance (and then pushed her into negative territory with a K code) on the basis of her salary/bonus. So once her actual income position is reported, that K code could get worse because they'll realise that she shouldn't have any personal allowance, in addition to whatever they are already clawing back from her...

foreveralone

Notnewnotold said:

foreveralone said:

Notnewnotold said:

By the way, if HMRC really do think that earnings are 105k then your wife probably has an even less favourable K code to come once they have the right information

What do you mean exactly by that?

I mean that if they think she's only earning 105k, then they would not have removed all her personal allowance (and then pushed her into negative territory with a K code) on the basis of her salary/bonus. So once her actual income position is reported, that K code could get worse because they'll realise that she shouldn't have any personal allowance, in addition to whatever they are already clawing back from her...

In that case, how do you deal when receiving bonuses that take your payslip to the no personal allowance wage band?

Jeremy535897

I don't understand the facts of this thread. OP's wife earns salary and bonuses, but all this year's bonuses have been paid. You would therefore expect that the remaining 2 months of income in 2020/21 will be less per month, on average, than the preceding ten, because there are no bonuses to come, yet there is a huge disparity of £75,000 between estimated earnings for the year on the personal tax account, and earnings estimated by OP's wife.

£180,000 a year, averaged over 12 months, is £15,000 a month, but I would expect the future two monthly figures to be less than this, for the reasons set out above. Applying a code of K1055X to £15,000 would give a tax deduction of about £5,500 a month.

foreveralone

Jeremy535897 said:

I don't understand the facts of this thread. OP's wife earns salary and bonuses, but all this year's bonuses have been paid. You would therefore expect that the remaining 2 months of income in 2020/21 will be less per month, on average, than the preceding ten, because there are no bonuses to come, yet there is a huge disparity of £75,000 between estimated earnings for the year on the personal tax account, and earnings estimated by OP's wife.

£180,000 a year, averaged over 12 months, is £15,000 a month, but I would expect the future two monthly figures to be less than this, for the reasons set out above. Applying a code of K1055X to £15,000 would give a tax deduction of about £5,500 a month.

My apologies if I didn't write her exact numbers, but I thought they weren't important, and what mattered was the income not noticed by HMRC, a tax change to KxxxxX and what were the implications of that for her.