Underpaid tax

Cazzaroo

Hi,

I've had a letter from HMRC advising me of my new tax code for 2021-2022 due to an underpayment of tax from 'previous years' of approximately £340.  In the letter it referred to a previous letter explaining that I've underpaid, but I've not received it.

When I go to my HMRC online account it says I've underpaid by £18 in 2021-2022 and I've paid the right amount for other years.

I'm totally confused and a bit miffed.  With the cost of living increasing and my mortgage increasing, this is the last thing I need.

I did do quite a bit of overtime in the last year but how is payroll getting the calculations so wrong?

Without earning overtime, I earn about £10k a year (a little over minimum wage) and I transferred my allowance to my husband years ago.

Please can someone explain in layman's terms how this works.

Thanks
Caz

Dazed_and_C0nfused

Firstly there is nothing particularly unusual about owing tax.

I suspect it is connected to you applying for Marriage Allowance.  

There are two things to consider with Marriage Allowance, one are you eligible and secondly can you, as a couple, benefit.

If you aren't liable to higher rate tax you are eligible.

But whether, as a couple, you benefitted, is down to your particular income levels.  It's possible you could end up owing say £170/year for 2 years whilst your spouse saved £200+/year for those 2 years.  So as a couple you are better off.

It's a bit unusual for HMRC to suddenly include tax owed from an earlier tax year this far through the year though.  Are you the tax code isn't for 2022:23?

If you want to get to the bottom of exactly what's happened I suggest you ask HMRC which tax year(s) the £340 relates to and for calculations for those tax year(s).  Then check your spouse has received the benefit of Marriage Allowance.  You may well find it's better for you as a couple to leave things as they are.  For example cancelling Marriage Allowance might make your £340 tax owed go away but could leave your spouse owing say £450.

Cazzaroo

Yes, sorry, you're right, it's 2022-2023.

No, my husband isn't in the higher tax band.

So they're putting it in 1 hand, and for all intents and purposes, taking it from the other?

Dazed_and_C0nfused

I was referring to you about being higher rate.  If you aren't higher rate then you are eligible to apply, whether it was beneficial depends on your personal circumstances.

So they're putting it in 1 hand, and for all intents and purposes, taking it from the other?

You could say that.  Or you could say they are acting on a valid application you have made.  

sheramber

When you transfer the marriage allowance you lose  10% of your personal allowance. So have less personal allowance to set against your income.

If your income for the year is lower than the reduced allowances then you will not pay tax.
If your income for the year exceeds that reduced amount then you will have  tax due.

But your husband will get a credit for the Marriage  transfer against his tax due.

When I transferred the allowance to my husband I paid £80 but he got credit for the full amount so as a couple we were better off.

badmemory

Are you by any chance paid weekly or 4 weekly?

MalMonroe

I'd definitely phone them and ask because, in my experience, HMRC DO sometimes get things wrong. And they took a large chunk of money off me when I first retired - which they had to return when I pointed out to them that they were in the wrong. (It took a while but was well worth the wait).  A few times since then I have had to contact them because they have tried to take tax from me when I don't even have an income at the personal allowance threshold. They've also fiddled about with my tax codes and I have to have three, simply because I have small private pensions as well as my state pension. Still, if they're happy . . . .  do query things you aren't sure about though because sometimes they get away with making mistakes when people don't double check the tax they should be paying. Naturally, if they think people owe them, they're on to the case straightaway.

Cazzaroo

I get paid on the last working day of the month.

Cazzaroo

I was supposed to be getting a letter explaining it but yet to receive it.