Redundancy entered wrong - am I being overtaxed?

PanPen

Asking this for a family member, so may need to return and clarify if I don't have all the answers but - 

Relative was made redundant last May. He has been on a non 1257L tax code for months and wasn't sure why. Eventually I showed him how to log I to online HMRC account and we can't make out what has happened. 

Employer 1(original) shows correct salary paid at end of April 2023 and May 2023 but also in May 2023 a substantial payment which has been heavily taxed something like -
Taxable income £8499.68
Income tax paid £2374.93
National insurance paid 428.50
Firstly is that even the correct amount of tax/N.I. to have taken from this payment?
Secondly this large payment was actually his redundancy pay plus some PILON. I assumed he would only be taxed on that PILON element, not the full amount?

Because he started the new job half way through May he was also paid a smaller amount by them so his estimated income for the year seems to have been calculated higher than it will actually be by HMRC so they think he's underpaid tax and so reduced his tax code from 1257L to 1141LX and Employer 2 (new) show W1/M1 on his wage slips.

All of this has resulted in him being pushed into higher rate tax but if the payroll at the first company had gotten it right his actually salary would be under the £50270. 

Does he owe this extra tax? 
If not how can he correct it?
Will he get a rebate or owe more next year?

Sorry for all the questions.  

Dazed_and_C0nfused

PanPen said:

Asking this for a family member, so may need to return and clarify if I don't have all the answers but - 

Relative was made redundant last May. He has been on a non 1257L tax code for months and wasn't sure why. Eventually I showed him how to log I to online HMRC account and we can't make out what has happened. 

Employer 1(original) shows correct salary paid at end of April 2023 and May 2023 but also in May 2023 a substantial payment which has been heavily taxed something like -
Taxable income £8499.68
Income tax paid £2374.93
National insurance paid 428.50
Firstly is that even the correct amount of tax/N.I. to have taken from this payment?
Secondly this large payment was actually his redundancy pay plus some PILON. I assumed he would only be taxed on that PILON element, not the full amount?

Because he started the new job half way through May he was also paid a smaller amount by them so his estimated income for the year seems to have been calculated higher than it will actually be by HMRC so they think he's underpaid tax and so reduced his tax code from 1257L to 1141LX and Employer 2 (new) show W1/M1 on his wage slips.

All of this has resulted in him being pushed into higher rate tax but if the payroll at the first company had gotten it right his actually salary would be under the £50270. 

Does he owe this extra tax? 
If not how can he correct it?
Will he get a rebate or owe more next year?

Sorry for all the questions.  

Why do you think that?

If it was payment after his P45 was issued then code 0T would have been used.

Does he normally complete a Self Assessment return?

If not then HMRC will review his tax position once all the details for 2023-24 have been finalised and he will be notified of any extra tax owed or refund due.

https://www.gov.uk/tax-overpayments-and-underpayments

PanPen

Sorry I'm a bit confused, why does he think what?

PanPen

His P45 has included his redundancy as income. The OT code was not used as far as he can tell. 

chrisbur

PanPen said:

Employer 1(original) shows correct salary paid at end of April 2023 and May 2023 but also in May 2023 a substantial payment which has been heavily taxed something like -
Taxable income £8499.68
Income tax paid £2374.93
National insurance paid 428.50
Firstly is that even the correct amount of tax/N.I. to have taken from this payment?
Secondly this large payment was actually his redundancy pay plus some PILON. I assumed he would only be taxed on that PILON element, not the full amount?

This is not the correct tax/NI if redundancy pay is included.  From what you have said (figures come from personal tax account) it appears that the employer has paid the redundancy as if it was normal earnings.  I would suggest first contacting that employer to check if this has happened and asking why this was done, might be a mistake by them that they can correct.  

Dazed_and_C0nfused

PanPen said:

Sorry I'm a bit confused, why does he think what?

It was referring to the bit I'd highlighted on bold,

Secondly this large payment was actually his redundancy pay plus some PILON. I assumed he would only be taxed on that PILON element, not the full amount?

sheramber

How much was redundancy pay?  

chrisbur

This seems to be getting a bit confused, you say his P45 included the redundancy but also that the final payment included it.  But the final payment appears to be one made after the P45 was issued.
To understand better could you give full details....
The P45 figures
Taxable gross and tax paid on payslip or advice if no payslip issued for each payment received  
Taxable gross and tax paid for each payment on personal tax account
Redundancy figure and which payment includes this.

PanPen

Sorry for the delay, it's taken a little while to get further info.

He spoke to the payroll people at the old company, who then had to go back to his old boss to clarify what was redundancy, PILON or salary. They also apparently had his redundancy age and starting age down wrong. So after lots of tooing and frowing the payroll people have issued a corrected P45 and said they have updated the HMRC account. 

After waiting a few days we've logged back into the HMRC and boy is it a mess! 
Now it shows the old employer as a current employer alongside his actual current employer to start with. His tax code for the old employer now as BRX. Further to this if you go into his pay from the old employer it now shows all the original wrong amounts, three lots of the corrected amount and then one of these being minused off again. HMRC now have his estimated pay as over double the original wrong amount. FGS!

This kerfuffle means they have estimated his total income for the year to a truly incredible amount and therefore the current employer tax code has been changed to a K number. At my wits end. 

I am assuming this means that his current job will have to use this K tax code and claw back a massive amount of tax back this month as they think he owes it, when obviously he does not?

Payroll don't seem to have a clue and aren't responding now to messages. 

Any thoughts on this?

Purplelady65

I would get your relative to ring HMRC when you are present and put the call on loudspeaker - assuming your relative consents to this. You may have to wait a while for the call to be answered but it’s probably easier to talk it through with someone than try and put it all down in writing.  

PanPen

Yes maybe that is the best option. He would be quite happy to do this but doesn't want to actually do the talking as he has anxiety issues but assume this would work if he gives his permission first. 

Thanks