Straight forward financial situation ... but high self assessment tax? 29 January at 5:55PM in Cutting tax 10 replies 286 views

richd70

Hi

I thought I had a pretty straightforward tax situation? I work for one employer and have no material external sources of income ... so when I filled in my self assessment tax return (admittedly a bit late), I was quite surprised to be presented with a £9,000+ tax due amount?!? Either I've entered a lot of information wrong, or something else is going wrong somewhere?!

Looking at my payslip from March 2022 it gives me YTD amounts for the tax year (I didn't get a P11D, for some reason, but do have a P60). I have to admit, it's a lot more complicated than I have thought in previous years!?

In my tax return, I entered that I received £7500 in car allowance (which I *think* I did, although doesn't say so on my payslip - it just says 'UK Non-pensionable Allowance' which works out £625 per month or £7500 a year)

I also entered that I received Private Medical Insurance of £1052 and Critical Illness of £129.

I entered that I received £500 in Taxed UK Interest and £247 in UK Dividends.

I entered that I gave £4433 in UK Gift Aid payments.

The rest of the values were already pre-populated from my company: Pay from employer - total from your P45 or P60. Enter the amount before tax taken off: £164329.

UK tax taken off employer pay: £53211.05. I'm not a director, and received no employment expenses or capital allowances. Employers NI £21,293. And something called 'Pensions Plus Employer' which is £935

My tax code is 1265T

I contributed £13,552 to my company pension scheme and my employer contributed £14,682

I also have 2 SAYE schemes running - one I pay £200pm into and the other I pay £150pm

Lastly, I told them I incorrectly received £672 (£56pm) in child benefit, which I have tried to stop a few times, but HMRC tells me to talk to the benefits people and the benefits people tell me to talk to HMRC, meanwhile, neither cancel the payments?!?

When I hit the 'calculate' button, it happily came back and said I owe an additional £9046 in tax!

Have I done something wrong in what I have entered? Or am I just not paying the correct amount of tax through my company?!?

Here are the calculations...

purdyoaten2

One thing stands out - you received a personal allowance which, on that income, you shouldn’t have! That’s a good chunk of it. Did you ultimately enter the P60 figures as there is huge scope for error based on what you have said? 

The car allowance should be taxed and in the P60 figures - you may have included it twice which would mean unnecessary of over £3000. 

Would it be worth paying an accountant £400-£500 to ensure that everything is correct, given the large numbers?

richd70

Thanks for your reply, I really appreciate it. I didn't actually enter the numbers, they were already pre-filled which always amazes me! (I guess HMRC is connected somehow to my company's payroll system?).

In hindsight, maybe an account would be worth it, but I really thought I was straightforward (despite the high values), and so didn't think about it. I've probably left it too late for this year now to instruct one, as I have to file and pay my tax else I'll get fined, etc. I know the numbers are high, but I didn't realise that I would lose my personal allowance - you're right, that probably hasn't helped.

That's an interesting observation regarding the car allowance. I don't think I have included it separately in previous returns, so maybe I don't need to include it in this one either? Especially if it means an unnecessary over tax amount. Maybe I'll remove it and see what that does?

Thanks again. If you think of anything/spot anything else, 

JGB1955

You've paid more than £5K in gift aid?  Wow!

purdyoaten2

richd70 said:

Thanks for your reply, I really appreciate it. I didn't actually enter the numbers, they were already pre-filled which always amazes me! (I guess HMRC is connected somehow to my company's payroll system?).

In hindsight, maybe an account would be worth it, but I really thought I was straightforward (despite the high values), and so didn't think about it. I've probably left it too late for this year now to instruct one, as I have to file and pay my tax else I'll get fined, etc. I know the numbers are high, but I didn't realise that I would lose my personal allowance - you're right, that probably hasn't helped.

That's an interesting observation regarding the car allowance. I don't think I have included it separately in previous returns, so maybe I don't need to include it in this one either? Especially if it means an unnecessary over tax amount. Maybe I'll remove it and see what that does?

Thanks again. If you think of anything/spot anything else, 

Check your payslip - it should be clear as to how much of your gross pay is taxable. Maybe provide a screenshot? 

You’re very relaxed about matters😊 ‘I don’t think I have included it separately in previous returns’. I would consider the difference in tax payable significant. 

You need to file the return by Tuesday but can amend it up to 31st January 2024. 

purdyoaten2

JGB1955 said:

You've paid more than £5K in gift aid?  Wow!

I would consider giving something similar - on £165000 of income.😁

sheramber

You need to contact the Child Benefit Office regarding stopping the child benefit not DWP. 

FatherTireseus

Hi Rich, just thought I'd add something on the P11d front.  That is the form the employer uses to notify HMRC if you have received any 'benefits in kind' (e.g. a company car, fuel card, private medical insurance are the common ones), where you have had a benefit but it's not been paid directly in cash.  Although a value can be attributed to these benefits, as it hasn't been paid in cash it's not been taxed directly.  Normally when HMRC gets wind of this your tax code is adjusted to try and make sure you're paying the right amount of tax but tax codes are only a way of estimating the tax you owe; it's the tax return at the end of the year that calculates if you're over or underpaid tax.

If you were getting PMI and critical illness cover then these really ought to be included in a P11d.

If you've had a car allowance in cash then I suspect it would have been added to all your employment income and tax calculated on it in the same way.  So as purdeyoaten2 says, you've probably paid tax on it twice as it will be in your P60 figures and you shouldn't need to declare it again.

unholyangel

You've possibly incorrectly declared interest. If it was savings interest paid by a bank or building society then it is likely untaxed interest, not taxed.

FatherTireseus

Now I've got a bit more time, I've looked at the calculations in detail.

I think the main thing that has caused you to have a tax bill of over £9k is that your tax code was incorrect.  As I said a couple of comments ago, the tax code is just HMRC's way of trying to ensure you pay enough tax during the year.  But if the tax code is wrong, you won't pay the right amount of tax and you'll be left with an under or over payment.

You say your tax code is 1265T (the T means other calculations are used to work out your personal allowance).  But a 'normal' tax code for anyone entitled to the standard personal allowance and no other adjustments, is 1257L.  So you actually have a little bit more allowance when in reality as someone earning over £125,140, your personal allowance should be zero.

If you have other benefits such as private medical insurance and critical illness cover, if HMRC were on the ball these should be reflected in your tax code so I would expect a code just to reflect those items of something like 118K (the K means that amount is added back to your income before tax is worked out - effectively the reverse of the personal allowance).  If you have interest from banks this is taxable and can be reflected in your tax code, but may not be.  If you have told HMRC that you expect to make a significant amount of gift aid donations, this gets added back to increase your personal allowance...the list of adjustments goes on.

As others have said the car allowance has probably been included as income by your employer and tax already paid on it, so it shouldn't be included separately. 

And I agree with unholyangel that if you have received bank or building society interest it is probably gross, not already taxed.  

So I think the bottom line is, you did pay too little tax during the year because your tax code told the employer to deduct too little tax compared with what you should have been paying.  But the car allowance factor, once corrected, will probably reduce that by £3,375 (£7,500 x 45%).

If you are submitting your return on line and you have access to your tax account, it might be worth checking your tax code for the current tax year 2022/23.  If you are going to be earning over £125,140, you can check your estimated income from employment and update it, if it's wrong.  This will help HMRC to adjust your tax code so the amount of tax you pay each month should be much closer to the final amount due for the year.  Although if you've been underpaying for the current tax year there isn't much time left in the year for any unpaid tax to be collected; so you might end up with a similar situation this time next year.

Then after April 6th this year, go on line and check that what it says in your tax account for your income, interest, dividends that you expect for 2023/24 is also in line with what you expect, and update it so at least next tax year you can minimise the risk of an unexpected bill in January 2025.

p00hsticks

sheramber said:

You need to contact the Child Benefit Office regarding stopping the child benefit not DWP. 

And rather than stopping it completely, if the child is under 12 and the other parent is not in paid employment, rather than stop claiming all together simply claim the NI credits in the partners name in order to help build their State Pension entitlement.