Income Tax Confusion

miss_saski

Hello, 

I am getting really confused about what has happened with my income tax on my wages. I have spoken to my current employer's accountant who handles the payroll, who said they were acting as instructed by HMRC. Spoke to HMRC who basically said the accountant has screwed up. Only reason I am chasing this up now is because I recently found the P800 letter my toddler kindly hid unopened behind the sofa! I have read the "underpaid tax" guide on this website, but I still do not know if someone has made mistakes that I will now be paying for, or even if it a mistake. I have always informed the payroll teams about tax code changes and always trusted their advice. I have never had this sort of problem before!

Brief overview of my employment history and tax payments (I get paid weekly so I have a lot of payslips to read through - the dates may not be 100% accurate):

06/07/20 - Started a new job after being informed that I will be made redundant after the furlough scheme winds down. BR tax code for new job whilst I was technically had 2 jobs.

26/07/20 - Official leaving date of old job. P45 states I had paid about £100 tax at this job at time of leaving

20/09/20 - Tax code changed to 478T, £400ish tax repayment

04/10/20 -  Tax code changed to 1250L, £200ish tax repayment, on payslip paid tax for year to date is £0

04/01/21 - Went onto Furlough, still on 1250L tax code, no tax paid

30/03/21 - P60 shows I was paid £12,295.20 on final tax code 1250L, with no tax deducted

04/04/21 - Tax code changed to 1257L, a normal amount of tax paid

This continued throughout 2021 and up to now. 

I think I kind of get why they are asking for tax - in total with the 2 jobs, I earned about £16,000 and only paid £100-ish of tax, but why did I end up paying no tax for so long? I remember questioning the payroll team at the time about it who said that HMRC will sort it - I did not intend to get a £750 shock!

I am about to hand my notice in to this job and start another one in April. I know that my tax code will be adjusted to 777L to reclaim the missing tax money, and I have a savings account that matures in June which I am debating about using to pay this tax off. 

So, wise members of the MSE forums, I am asking for your advice:

Has the accountant or HMRC made an error somewhere, or am I trying to avoid the inevitable? Is there perhaps anything I can do to maybe avoid or lessening what I owe? Would you recommend paying it off as a lump sum or cope with a deduction on my wages? Is there anything I can do to avoid getting in this mess again?

sheramber

26/07/20 - Official leaving date of old job. P45 states I had paid about £100 tax at this job at time of leaving

Did you hand this P45 to your new employer.?


04/10/20 -  Tax code changed to 1250L, £200ish tax repayment, on payslip paid tax for year to date is £0

This code number gave you full personal allowances for the year. But you had already used up some of them in your previous job so you were not entitled to them all so should not have had all the tax refunded.
This is why you now have an underpayment.