Self Assessment vs PAYE

TheBanker

Hi,

For the 2021/2 tax year I had to complete a Self Assessment form for the first time. My only income is from my employer and I am not a company director, so I believe the reason for needing to complete the form was that my employer reported a taxable income of over £100k.

My income is made up of:
Employment earnings - taxed through PAYE
Negligible income from savings interest (approx £200) and dividends (approx £300)

I claim tax relief for charitable donations but other than that there's nothing exciting about my tax affairs!

When I check my Tax Code, it shows a deduction for an underpayment of £69 in the 2021/2 tax year. My self-assessment return said I owed £90, which I paid. 

My question is whether I am paying the same tax twice? Once through a reduction in my tax code, and once through self-assessment? And if so will this sort its self out when I complete my 2022/3 return? Currently my Personal Tax Account is saying I have underpaid £108 this year (2022/3) leading to a further change in my tax code. I thought the purpose of self-assessment was to identify and deal with any over/underpayments, so I'm not sure why my PAYE tax code is changing, and at the same time I'm being asked to pay extra through SA?

Dazed_and_C0nfused

Can you clarify, is the £69 included in a 2021:22 tax code?  Or a 2022:23 tax code?

Nothing usual at all about being in Self Assessment and having underpayments in your tax code.

TheBanker

It's included in my current (2022/3) tax code but relates to an underpayment in 2021/2.

But I've already paid the extra I owed for 2021/2 through Self Assessment (I think) so if they are also collecting £69 through my tax code I think I'm paying twice. But I also think this might sort its self out when I submit my 2022/3 tax return?

At least it's only £69!

[Deleted User]

TheBanker said:

It's included in my current (2022/3) tax code but relates to an underpayment in 2021/2.

But I've already paid the extra I owed for 2021/2 through Self Assessment (I think) so if they are also collecting £69 through my tax code I think I'm paying twice. But I also think this might sort its self out when I submit my 2022/3 tax return?

At least it's only £69!

It will sort itself out! There is a specific question regarding underpayments from an earlier year on the return. 

sheramber

In the section finishing your return

If you have not paid enough tax We recommend you pay any tax due electronically. Read the notes. 2 If you owe less than £3,000 for the 2021–22 tax year (excluding Class 2 NICs) and you send us your paper tax return by 31 October, or 30 December 2022 if you file online, we’ll try to collect the tax through your wages or pension by adjusting your 2023–24 tax code. If you do not want us to do this, put ‘X’ in the box

TheBanker

sheramber said:

In the section finishing your return

If you have not paid enough tax We recommend you pay any tax due electronically. Read the notes. 2 If you owe less than £3,000 for the 2021–22 tax year (excluding Class 2 NICs) and you send us your paper tax return by 31 October, or 30 December 2022 if you file online, we’ll try to collect the tax through your wages or pension by adjusting your 2023–24 tax code. If you do not want us to do this, put ‘X’ in the box

Thanks, I will be sure to mark an X this time. Last year's return was submitted after 30 December so would not have been possible. 

If I have to complete a Self Assessment return, does my tax code actually matter? Or is everything re-calculated using the details on the SA form to work out if I owe them anything, or if I'm due a refund?

[Deleted User]

TheBanker said:

sheramber said:

In the section finishing your return

If you have not paid enough tax We recommend you pay any tax due electronically. Read the notes. 2 If you owe less than £3,000 for the 2021–22 tax year (excluding Class 2 NICs) and you send us your paper tax return by 31 October, or 30 December 2022 if you file online, we’ll try to collect the tax through your wages or pension by adjusting your 2023–24 tax code. If you do not want us to do this, put ‘X’ in the box

Thanks, I will be sure to mark an X this time. Last year's return was submitted after 30 December so would not have been possible. 

If I have to complete a Self Assessment return, does my tax code actually matter? Or is everything re-calculated using the details on the SA form to work out if I owe them anything, or if I'm due a refund?

You’ve got it - the PAYE code doesn’t matter at all. It is simply a mechanism used by HMRC to collect the correct amount of tax, or as close as possible throughout the tax year.