Due tax refund..

Bod_1234

Due a tax refund, not sure how it's going to arrive.

Background, for the first half of this year, I was in employment and earning a regular wage, paying income tax via PAYE every  month as part of my wages.  Midway the the year, I quit, I'm now the director of my own limited company.

I'm using Freeagent for bookkeeping (just for me, the sole director).  I set myself a small wage also done PAYE, as I need to get some cash reserves into the business.

Freeagent asked for details on my previous salary and tax paid, put that all in, and it informed me that I have paid too much income tax this year (as expected), and I should start rebates to myself from the company funds.  So if I pay myself £1000 there is an adjustment I need to pay.  I have been paying myself my pay plus these adjustments as per the Freeagent payslips it generates every month.

My question is this.  My company is essentially "out of pocket" on these tax rebates I am paying myself, as it was money over paid in my previous employment, that my new company has to cop for

Will HMRC be paying my company this money I have paid out to me (as an an employee) at some point, or will it be calculated out of my corporation tax, or will something else happen?

Is this all normal? Seems very odd  that a company has to sort out the overpayment from a previous employment and HMRC hang on to all that cash until they fancy paying it out.

My accountant say it will sort itself out, but slim on details..

lisyloo

Shame your accountant wont explain it.
i think your accountant will need to do accounts and submit them to HMRC, so it could be many months in arrears.

uknick

I'm a little confused why your Ltd is paying you tax rebates.

I can understand payroll software reducing how much tax is due on your pay on a YTD basis and, if at tax year end, you haven't got to where you should have been be telling HMRC you're due a PAYE tax rebate.  You, as the employee, will then get this, as a tax code change or cheque, a few months after the tax year end.  It used to be about July but not sure these days.

Plus, payments of income tax and NI, if applicable in your case, don't tend to be deductions for CT purposes.

Bod_1234

uknick said:

I'm a little confused why your Ltd is paying you tax rebates.

Me too...  I checked with my accountant and Freeagent support, and it's correct, but in my mind, HMRC owes my company the money,  not me, as my company paid the over-tax.

It sounds odd to me, hence why I am asking this.  Anyone else had this situation?

BoGoF

Have a look here - https://www.gov.uk/payroll-funding

You might have been better operating a week1/month1 code to avoid this and let HMRC make the refund at the end of the tax year.

Or you just leave it till year end and tbe company's PAYE account will be in credit, which you can claim back.

Dazed_and_C0nfused

uknick said:

I'm a little confused why your Ltd is paying you tax rebates.

I can understand payroll software reducing how much tax is due on your pay on a YTD basis and, if at tax year end, you haven't got to where you should have been be telling HMRC you're due a PAYE tax rebate.  You, as the employee, will then get this, as a tax code change or cheque, a few months after the tax year end.  It used to be about July but not sure these days.

Plus, payments of income tax and NI, if applicable in your case, don't tend to be deductions for CT purposes.

I think the way the op has explained it may be a little confusing.

It is the new employer, which the op is effectively in control of, which is making the refunds and there is nothing unusual in that.

Also, HMRC don't refund tax overpaid in one year by an adjustment to the tax code of a later year.

Bod_1234

BoGoF said:

Have a look here - https://www.gov.uk/payroll-funding

You might have been better operating a week1/month1 code to avoid this and let HMRC make the refund at the end of the tax year.

Or you just leave it till year end and tbe company's PAYE account will be in credit, which you can claim back.

Many thanks.  Reading that, it appears perfectly normal, and my accountant will offset it from my company tax bill at the end of the year.  It's weird HMRC get the interest on that money over the year,  not me,  but nothing surprises me anymore.

uknick

Dazed_and_C0nfused said:

uknick said:

I'm a little confused why your Ltd is paying you tax rebates.

I can understand payroll software reducing how much tax is due on your pay on a YTD basis and, if at tax year end, you haven't got to where you should have been be telling HMRC you're due a PAYE tax rebate.  You, as the employee, will then get this, as a tax code change or cheque, a few months after the tax year end.  It used to be about July but not sure these days.

Plus, payments of income tax and NI, if applicable in your case, don't tend to be deductions for CT purposes.

I think the way the op has explained it may be a little confusing.

It is the new employer, which the op is effectively in control of, which is making the refunds and there is nothing unusual in that.

Also, HMRC don't refund tax overpaid in one year by an adjustment to the tax code of a later year.

Thanks, getting confused with underpaid tax.