Balancing payment / POA & adjusted tax code

Hi all

I've underpaid tax last year and am due to pay approx 14K at the end of Jan next year; 11K balancing payment and 3K POA.

However, I was given the option to collect payments via my tax code and it's now been changed to K2104X - doesn't that mean "£21,040 needs to be added to your pay or pension so the extra tax can be collected"? Not sure why such a high number has been added - the extra tax was due to property income that had a profit of 16K... and next year it will be half that (and yes, I know I can reduce the POA to reflect which I may do).

Anyway, this is taking a large chunk out of my salary each month. That's fine... assuming it reduces the 11K balancing payment due.

What I wanted to double check was... does it?? Or are HMRC still expecting an 11K (plus 3K POA) payment end of January as well? If it IS indeed reducing that amount, will I get a letter stating a corrected payment amount closer to the time?

Many thanks
Rx
«1

Comments

  • It ha absolutely nothing to do with either the Balancing Payment or the POA.

    The POA is entirely based on your 2022-23 Self Assessment liability.

    If you believe that, because of the extra tax being deducted for the current tax year, the POA are excessive them you can make a claim to reduce them.

    However if you get this wrong, for ANY reason, and the POA need to be increased (they never go above the original amount determined by the 2022-23 return) then you would be charged late payment interest.

    Alternatively ask for your tax code to be adjusted back to what it was.
  • mrrossi
    mrrossi Posts: 32
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    Hi, thanks for the reply. So what is the tax adjustment for then? As if they continue to tax me so heavily there's no way I'll be able to put enough aside to pay the balancing payment!

    Regarding the POA and possible adjustment - yes, aware of this, which is why I may not bother - also, that is only £3K which is "affordable" - it's the 11K that is problematic and the amount they are taxing me right now :(
  • sheramber
    sheramber Posts: 18,622
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    Do you have other deduction from your personal allowances such cer benefit?

    What figures are on your notice of coding?
  • mrrossi
    mrrossi Posts: 32
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    It says:

    • you now get Gift Aid Payments worth £113
    • your Personal Pension Payments has been reduced from £3,791 to £938
    • you now get Profit - Property income worth £10,000
    • your Estimated tax you owe this year has been increased from £539 to £15,664

    Which I don't really get, as the property profit is a little more than that (16K) and has been the same for the last 6 years.

    What's changed was I went from contracting via an Umbrella Company to a Permanent role, but the Umbrella company was treated as a permy role for tax purposes and therefore I should have been taxed accordingly and correctly, aside from the property income which I did on my SA. All I can think of is that the Umbrella company miscalculated and I didn't pay enough tax in the 18 months or so I was with them...
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 12,744
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    edited 13 October 2023 at 11:53AM
    mrrossi said:
    It says:

    • you now get Gift Aid Payments worth £113
    • your Personal Pension Payments has been reduced from £3,791 to £938
    • you now get Profit - Property income worth £10,000
    • your Estimated tax you owe this year has been increased from £539 to £15,664

    Which I don't really get, as the property profit is a little more than that (16K) and has been the same for the last 6 years.

    What's changed was I went from contracting via an Umbrella Company to a Permanent role, but the Umbrella company was treated as a permy role for tax purposes and therefore I should have been taxed accordingly and correctly, aside from the property income which I did on my SA. All I can think of is that the Umbrella company miscalculated and I didn't pay enough tax in the 18 months or so I was with them...
    Your tax code has been changed to try and collect additional tax due for the current tax year, it is not collecting tax for a previous tax year, that is all resolved via your Self Assessment return.

    HMRC have simply reacted to something you did (or didn't) do on your latest return.

    One of the questions near the end of the return is about whether you want HMRC to try and collect extra tax for this tax year via your tax code.  This is the wording from the tax return notes.

    Box 3
    If you’re likely to owe tax on:
    • Child Benefit payments (the High Income Child Benefit Charge)
    • savings or investments income
    • property income
    • casual earnings or commission
    for the 2023 to 2024 tax year, we’ll try to collect it through your wages or pension from 6 April 2023.
    If the income is more than £10,000 we’ll not normally do this.
    Only put ‘X’ in box 3 if you do not want us todo this and would prefer to pay any tax through your Self Assessment by 31 January 2024

    If you have now decided that wasn't a good option then just ask HMRC to remove the property income entry from your tax code.  That will also reduce the underpaid tax adjustment.

    But then you probably shouldn't make any change to your 2023-24 POA
  • sheramber
    sheramber Posts: 18,622
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    Have you chased that your figures on self assessment return for pay and tax  are correct?

    Did you only have PAYE income during 22/23?


  • mrrossi
    mrrossi Posts: 32
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    Thanks all for the clarifications. If the tax code adjustment is indeed only for the current tax year, then that's going to be wrong anyway as I'm no longer earning property income on one of my two properties (it's being sold). So it does sound best to ask them to remove the property income, thanks.

    I only had PAYE income during 22/3 + the property incoming.
  • mrrossi
    mrrossi Posts: 32
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    I've tried calling them this afternoon to request a tax code change but after 10 mins of waffle and warnings I'll be in a queue they then say they can't take my call and it ends!

    Tried to change online and all I can see if that I can "update or remove" the profit (10k) and "non coded income" (6K). Why has it split the 16K income profit like this, and what do I need to update with to correct it? The profit will only be 9.6K this year.
  • mrrossi said:
    I've tried calling them this afternoon to request a tax code change but after 10 mins of waffle and warnings I'll be in a queue they then say they can't take my call and it ends!

    Tried to change online and all I can see if that I can "update or remove" the profit (10k) and "non coded income" (6K). Why has it split the 16K income profit like this, and what do I need to update with to correct it? The profit will only be 9.6K this year.

    It's because they won't normally include more than £10k.  

    The "non coded income" element is to try and ensure any tapering of the Personal Allowance (or Married Couple's Allowance) is done reasonably accurately.

    Strictly you probably want £0 rental income (profit) and £16k non coded income.

  • mrrossi
    mrrossi Posts: 32
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    Thanks all once again. I tried to complete the online form to adjust before I went on holiday but ultimately just entered some text saying "please can I change the tax code back to NOT collect the extra tax through it" - and it's worked, they've adjusted the code!

    Unfortunately, they've done it too close to payroll and my work says they cannot adjust for this months pay. So that means I'm going to be taxed the extra amount again, 2 months in a row.

    Is there a way I can claim this back please?
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