Tax you owe (earlier year) 24 February at 11:00AM edited 24 February at 11:07AM in Cutting tax 3 replies 136 views

RG2015

I have just received my Tax Code Notice for 2023/2024 and it has it has an adjustment for "Tax you owe (earlier year).

The note says, "We previously told you that you owe £xx from an earlier tax year.  We have therefore included an adjustment to reduce your tax free allowance by £xxx so we can collect the £xx tax in equal instalments"

Contrary to their statement I have not been informed of any underpayment and while I am not so concerned about the amount as the process and the year for which I have underpaid tax.

My PTA online states for both 2020/2021 and 2021/2022, "You paid the right amount of tax. There is nothing more to pay for this year."

Having eliminated these two years that really only leaves 2022/2023 but this year could not as yet been assessed for tax.

Does any of this make any sense?

molerat

"You paid the right amount of tax. There is nothing more to pay for this year."

Unfortunately that statement often means nothing of the sort.  It can mean "we have accounted for any underpaid tax in a future year"

Does any of this make any sense?

You are talking about HMRC here

RG2015

molerat said:

"You paid the right amount of tax. There is nothing more to pay for this year."

Unfortunately that statement often means nothing of the sort.  It can mean "we have accounted for any underpaid tax in a future year"

Does any of this make any sense?

You are talking about HMRC here

Thank you, and this makes perfect sense. However I am (reasonably) confident that the last two years are okay and my state pension has caused these issues.

Is it possible that the earlier year could in fact be the current year?

Dazed_and_C0nfused

RG2015 said:

molerat said:

"You paid the right amount of tax. There is nothing more to pay for this year."

Unfortunately that statement often means nothing of the sort.  It can mean "we have accounted for any underpaid tax in a future year"

Does any of this make any sense?

You are talking about HMRC here

Thank you, and this makes perfect sense. However I am (reasonably) confident that the last two years are okay and my state pension has caused these issues.

Is it possible that the earlier year could in fact be the current year?

Yes.

The tax code you are referring to us for 2023:24 (the next tax year about to start).

So in that context tax due for an "earlier year" could well be the current tax year, which is earlier than the tax year the tax code you are discussing is for.

If your 2022:23 tax code has been recalculated at any point after 5 April 2022 then it's possible a (provisional) underpayment could have been calculated. 

The default position is to collect that extra tax throughout the rest of that tax year (2022:23) but there are situations where it gets moved into the next tax year.  Which would be 2023:24 in this instance.

https://www.gov.uk/hmrc-internal-manuals/paye-manual/paye11100

2022:23 will be reviewed later this summer and if that provisional amount turns out to be wrong (ignoring small discrepancies) then you will be sent a P800 calculation showing the actual amount due.

If you owe less your 2023:24 tax code will be revised to show the reduced underpayment.  Or remove it altogether if there is no underpayment.

If you owe more tax for 2022:23 then the underpayment entry in your 2023:24 tax code will remain and the extra will be included in your 2024:25 tax code.