Help understanding how repaying tax via PAYE works

Soot2006

I have tried a search but still am confused. Many thanks for help!

I lost my job earlier this year and the redundancy payment pushed me into a higher tax bracket. I happily found a new job quickly and received one March payment. Only 20% tax was taken as I was on 1m1w, so I knew roughly what would need to be paid back.

Registered for the online tax account and have seen this message. I don't understand why the reduction in personal allowance is so extreme - any help understanding is appreciated!

You did not pay enough Income Tax for a previous tax year.

You owe £1,956

How it will be collected

To collect this we have reduced your Personal Allowance by £9,780. This means that you will pay more tax until 5 April 2025, so that we can collect the £1,956 owed.

Your tax code has been adjusted for this.

badmemory

There should be a breakdown of how they calculated it.  It is possible that they think you still have both jobs.

Albermarle

If your personal allowance is reduced by £9,780, it means you will pay 20% tax on income of that amount = £1,956

[Deleted User]

Soot2006 said:

I have tried a search but still am confused. Many thanks for help!

I lost my job earlier this year and the redundancy payment pushed me into a higher tax bracket. I happily found a new job quickly and received one March payment. Only 20% tax was taken as I was on 1m1w, so I knew roughly what would need to be paid back.

Registered for the online tax account and have seen this message. I don't understand why the reduction in personal allowance is so extreme - any help understanding is appreciated!

You did not pay enough Income Tax for a previous tax year.

You owe £1,956

How it will be collected

To collect this we have reduced your Personal Allowance by £9,780. This means that you will pay more tax until 5 April 2025, so that we can collect the £1,956 owed.

Your tax code has been adjusted for this.

If there is an underpayment of £1956 the tax coding adjustment is correct. You will pay tax on an extra £9780 at 20%. That is exactly £1956 or £163 per month! 

I have to say though it is VERY unlikely that the underpayment relates to 2023/24 tax year!

Soot2006

Thanks, everyone!

I think I must have had my stupid Sunday brain installed.

I was double confused, because (as Ferro suggests) I also have the message that the calculation for y.e. 2024 hasn't yet been processed. Which means I'm likely to have underpaid even more tax. Sad times. No idea how an underpayment in y.e. 2023 could have occurred. Will need to do some digging!

ETA: it does also say this

You paid the right amount of Income Tax for 6 April 2022 to 5 April 2023

Maybe I just need to leave it alone for a few weeks/months now until y.e. 2024 is confirmed, and then I can revisit everything.  It's been a tough year with losing my job and I have paid a LOT more tax than ever before so it's all a lot to process.

MetaPhysical

If you know with certainty that you are right and you have paid the correct tax and it is just a matter of HMRC catching up then you can go onto your tax account and change your code yourself by adjusting your expected income this coming year.  However, be sure you have your facts straight or else you will be kicking the can down the road if you do indeed owe that tax.