PAYE Tax Calculation Incorrect

Dazed_and_C0nfused

hampshiremoneysaver said:

Hi

Not sure if this is the right board to post on so apologies if not!
I process the payroll at my work and have never had any issues with this. I'm the only employee on PAYE so a fairly simple process. I've just printed off my P60 for the year and instantly saw that the tax paid seems incorrect - underpaid by around £200.
Gross earnings £14,515.75 - tax paid £193.40.

I've looked back through every payslip and on every one the tax seems to be correct, except for one which showed a refund of £95 - I probably should have queried it at the time, but as there had been a couple of overtime payments in previous periods I thought maybe it was just correcting overpaid tax or something and the boss agreed so paid me the extra amount.
However, even if this is incorrect then the underpaid tax should only be around £100, which I can accept is an error - though still not clear why the system worked out this refund.

I've worked out there would normally be a tax amount of £1.80 for what seems to be an incorrect  payslip (paid bi-weekly and I only earn around £14500 so not much over personal allowance so tax is always small.) which would have brought the total tax paid to £290.20, yet when I work it out only yearly earnings the 20% tax comes out as £389.15.
I just can't fathom how this can be so incorrect and why the Sage Payroll system would be calculating things wrong. I don't have any irregularities/unusual circumstances, just on the standard 1257L tax code.
Any suggestions?  Or do I just wait for a letter from HMRC to say I've underpaid and then send them payslips and query with them?
Just concerned as I can't work out why Sage Payroll would be making the deductions wrong over the year and don't want it to happen again this year. Apart from the £95 refund one, it would just then seem to be a small error on every payslip that accumulates over the year.

I think you are conflating a couple of issues.

As you have had a week 54 payment you should expect to owe ~£98 to HMRC in due course.

This is because you have received 54 weeks worth of tax code allowances when you are ultimately only due 52 weeks worth.  This is an intentional part of how PAYE works and avoided you paying basic rate tax on your final "week 54" payment.

You can expect to be notified of the actual amount owed later this summer and, if possible, HMRC will try and collect it be reducing your tax code allowance for the year to 5 April 2026.  Basically it's an interest free loan from HMRC meaning you pay an extra ~£3/4 every pay day for a year instead of it in one go.

For the other aspect the logical conclusion from what you have posted is that you (as payroll processor) have made a mistake somewhere and benefited by £95 during the year and this will be clawed back by HMRC as part of the same calculation they will issue because of the week 54 payment.

I don't understand this comment 

Or do I just wait for a letter from HMRC to say I've underpaid and then send them payslips and query with them?

What is there to query?  You have processed the payroll and presumably reported the correct figures to HMRC i.e. what you earned and the tax deducted.  They will send you a calculation based on that information, they will not change anything.  In fact they are likely to tell you (the taxpayer) to go and speak to you (the payroll person) if you (the taxpayer) think something is wrong.

hampshiremoneysaver

Thanks for your reply. Yes understand what you're saying and I guess I just have to accept it and find a way to pay.
I haven't had the week 53 situation occur before and wasn't expecting it would be that far out in the calculations to be around £100 short - given total tax for the year is under £400. But you live and learn!
Re: querying with HMRC I just thought maybe they could explain what tax should've been deducted each month but from what you say this is just how the system works when there's a week 53.
Glad I'm not on a higher wage and being hit with a much larger payment at the year end!

I still can't work out why the payroll system calculated the other refund, Sage can't see any reason why it should have done that and said if they try rerunning the pay run it shows the normal £1.80 tax. It's just frustrating when you rely on their software to calculate it correctly. As far as I'm aware I did nothing different from any other payment run including ones with overtime yet for some reason this has caused an error on this occasion, so there must've been something different! Hopefully with a bit more digging I can find out why the totals aren't adding up and sort it.
All a learning curve, unfortunately got thrown into running the payroll system with no real training when a new owner took over the business and it's been ok for years as it's been fairly simple but not surprised to have an error at some point!
Thanks for everyone's comments.

chrisbur

For a refund to be made it has to be deducted first if you give the payslip figures as you earlier gave for the payday that had the refund and the payday before that, this will give a better idea of what has happened.

hampshiremoneysaver

Hi

Just updating on this. Having done a lot of digging there didn't seem to be any reason why Sage calculated a £95 refund that could be identified. Editing this pay run and just removing and redoing the salary payment resulted in correct calculations so this is what I've been advised to do and submit a supplementary FPS to HMRC as I'd processed year end. So this resolves this part of the issue and the £96.80 I owe for this will be deducted from my next pay. Annoying but lesson learned to query more thoroughly at the time any unexpected refund!

This just leaves an underpayment of £98.95 due to week 53 and I understand I should get a P800 in due course from HMRC about this. Does anyone know if you are able to pay any underpayment in one go or does it have to be done via PAYE deductions/changed tax code? I'd kind of prefer to just be up to date on what I owe but don't know of that's possible?

[Deleted User]

hampshiremoneysaver said:

Hi

Just updating on this. Having done a lot of digging there didn't seem to be any reason why Sage calculated a £95 refund that could be identified. Editing this pay run and just removing and redoing the salary payment resulted in correct calculations so this is what I've been advised to do and submit a supplementary FPS to HMRC as I'd processed year end. So this resolves this part of the issue and the £96.80 I owe for this will be deducted from my next pay. Annoying but lesson learned to query more thoroughly at the time any unexpected refund!

This just leaves an underpayment of £98.95 due to week 53 and I understand I should get a P800 in due course from HMRC about this. Does anyone know if you are able to pay any underpayment in one go or does it have to be done via PAYE deductions/changed tax code? I'd kind of prefer to just be up to date on what I owe but don't know of that's possible?

You will most certainly be able to pay in one go!

Are you  certain that the submission of the supplementary FPS will affect your tax deductions on this tax year? It’s more a case of working out the amount owed, having your employer repay it, and reimbursing your employer. Unless that is what you mean will happen by deduction from your salary.