Self assessment tax bill of 7k!!

Elmroad82

I’ve been asked by HMRC to do a self assessment tax return for 23/24. I'm PAYE. Unfortunately HMRC changed my tax code so I've been under taxed by 7k!! which is very alarming. (I've no idea why they changed my tax code as my incomes not changed for 3 years). Salary was 87k plus vested shares 18k. Other income is about 1k.

I’m looking to reduce my taxable income/ tax bill. I have a retired accountant but he's pretty vague in responding to me and I'm not sure how up-to date his advice is. 

I have 2 questions

•  what are the allowable expenses for a salaried office worker on PAYE individual of over 100-110k
• Can I backdate any payments into my SIPP for the 23/24 year. My accountant says I can if my SIPP allows it but I've never heard of any providers that allow this.

Any help would be great - even if directional as I’m not sure how accurate the advice is that I’m getting. . 

Grumpy_chap

Is the £100k - £110k after considering pension contributions?
Did you have deductions for things such as child care vouchers?
Did you make any Gift Aid donations?
Do you incur travel / car expenses associated with your employment that are not reimbursed at the full extent of the tax allowable rates?

It is too late now to make pension contributions for 2023 - 24.  What was your Accountant referring to here?  Perhaps a communication at cross-purposes?

Dazed_and_C0nfused

Elmroad82 said:

I’ve been asked by HMRC to do a self assessment tax return for 23/24. I'm PAYE. Unfortunately HMRC changed my tax code so I've been under taxed by 7k!! which is very alarming. (I've no idea why they changed my tax code as my incomes not changed for 3 years). Salary was 87k plus vested shares 18k. Other income is about 1k.

I’m looking to reduce my taxable income/ tax bill. I have a retired accountant but he's pretty vague in responding to me and I'm not sure how up-to date his advice is. 

I have 2 questions

•  what are the allowable expenses for a salaried office worker on PAYE individual of over 100-110k
• Can I backdate any payments into my SIPP for the 23/24 year. My accountant says I can if my SIPP allows it but I've never heard of any providers that allow this.

Any help would be great - even if directional as I’m not sure how accurate the advice is that I’m getting. . 

What expenses did you incur?

You can never backdate pension contributions.

Have you made any Gift Aid donations in the current (2024-25) tax year?  If yes have you submitted your 2023-24 return yet?

And is the £7k all for 2023-24 or does that include POA for 2024-25?

Elmroad82

I asked earlier today if I could contribute to my 23/24 SIPP and my accountant said “You can pay into your sipp provided the terms allow and apply the amount to 23/24 year”. 

The 100-110k is after pension contributions as it’s taken at source. I’m on income protection insurance as I’m off sick. This covers a percent of my salary.  I have a car allowance. Can I claim fur car maintenance?

I’ve not submitted my 23/24 tax return. My accountant was calculating it and just informed me I have 7k to pay for 23/24 and an estimate of 6k next year. 

I’ve made no charitable gift contributions…

Dazed_and_C0nfused

Elmroad82 said:

I asked earlier today if I could contribute to my 23/24 SIPP and my accountant said “You can pay into your sipp provided the terms allow and apply the amount to 23/24 year”. 

The 100-110k is after pension contributions as it’s taken at source. I’m on income protection insurance as I’m off sick. This covers a percent of my salary.  I have a car allowance. Can I claim fur car maintenance?

I’ve not submitted my 23/24 tax return. My accountant was calculating it and just informed me I have 7k to pay for 23/24 and an estimate of 6k next year. 

I’ve made no charitable gift contributions…

Is your accountant friendly with Dr Who?  Without a time machine you cannot contribute to a pension in 2023-24.  And anything you contribute now is irrelevant as far as 2023-24 is concerned.

Have you used your own car for any business mileage?

Do you expect to make any charitable donations before submitting your return?  That is likely to be your best option for reducing your 2023-24 tax liability.  But won't save you any money overall.

Elmroad82

Dazed_and_C0nfused said:

Elmroad82 said:

I asked earlier today if I could contribute to my 23/24 SIPP and my accountant said “You can pay into your sipp provided the terms allow and apply the amount to 23/24 year”. 

The 100-110k is after pension contributions as it’s taken at source. I’m on income protection insurance as I’m off sick. This covers a percent of my salary.  I have a car allowance. Can I claim fur car maintenance?

I’ve not submitted my 23/24 tax return. My accountant was calculating it and just informed me I have 7k to pay for 23/24 and an estimate of 6k next year. 

I’ve made no charitable gift contributions…

Is your accountant friendly with Dr Who?  Without a time machine you cannot contribute to a pension in 2023-24.  And anything you contribute now is irrelevant as far as 2023-24 is concerned.

Have you used your own car for any business mileage?

Do you expect to make any charitable donations before submitting your return?  That is likely to be your best option for reducing your 2023-24 tax liability.  But won't save you any money overall.

That’s exactly what I thought! Hence my concern at the advice I’m being given. 

Can I make a charitable donation now in December-24 and can it reduce my 23/24 taxable income. 

Any idea why HMRC changed my tax code for no reason?

Dazed_and_C0nfused

Elmroad82 said:

Dazed_and_C0nfused said:

Elmroad82 said:

I asked earlier today if I could contribute to my 23/24 SIPP and my accountant said “You can pay into your sipp provided the terms allow and apply the amount to 23/24 year”. 

The 100-110k is after pension contributions as it’s taken at source. I’m on income protection insurance as I’m off sick. This covers a percent of my salary.  I have a car allowance. Can I claim fur car maintenance?

I’ve not submitted my 23/24 tax return. My accountant was calculating it and just informed me I have 7k to pay for 23/24 and an estimate of 6k next year. 

I’ve made no charitable gift contributions…

Is your accountant friendly with Dr Who?  Without a time machine you cannot contribute to a pension in 2023-24.  And anything you contribute now is irrelevant as far as 2023-24 is concerned.

Have you used your own car for any business mileage?

Do you expect to make any charitable donations before submitting your return?  That is likely to be your best option for reducing your 2023-24 tax liability.  But won't save you any money overall.

That’s exactly what I thought! Hence my concern at the advice I’m being given. 

Can I make a charitable donation now in December-24 and can it reduce my 23/24 taxable income. 

Any idea why HMRC changed my tax code for no reason?

No, Gift Aid donations do not reduce your taxable income.

However they do have four distinct benefits from a tax perspective.

1.  You only pay a net of basic rate tax relief amount, so £100 from you means the charity will get £25 (20% of the gross contribution).

2.  The gross contribution increases your basic rate band, meaning more income is taxed at 20% and less at 40%

3.  The gross contribution reduces your adjusted net income (which is used to establish your Personal Allowance).

4.  You can elect to carry back contributions from the current year back to 2023-24.  But you must do that on the first return you submit for 2023-24.  And you must also remember you have done that when you come to file your 2024-25 return!

There could be lots of reasons why HMRC might have changed your tax code.  Personally I find it frustrating that you seem to have had a £7k interest free loan from HMRC but that's your good fortune, shame we can't all have one though!

Elmroad82

So if I my taxable income is 102k, is there anyway to reduce it to under 100k that will be financially beneficial? In theory I could make a 5k gift which would mean I’d be taxed at 1k vs 2k? But you’re saying this wouldn’t reduce my taxable income?
I guess it is a tax free loan but unfortunately it was a loan I didn’t apply for and wasn’t aware I was getting. My payslip is almost indecipherable.
thanks 

Albermarle

Elmroad82 said:

Dazed_and_C0nfused said:

Elmroad82 said:

I asked earlier today if I could contribute to my 23/24 SIPP and my accountant said “You can pay into your sipp provided the terms allow and apply the amount to 23/24 year”. 

The 100-110k is after pension contributions as it’s taken at source. I’m on income protection insurance as I’m off sick. This covers a percent of my salary.  I have a car allowance. Can I claim fur car maintenance?

I’ve not submitted my 23/24 tax return. My accountant was calculating it and just informed me I have 7k to pay for 23/24 and an estimate of 6k next year. 

I’ve made no charitable gift contributions…

Is your accountant friendly with Dr Who?  Without a time machine you cannot contribute to a pension in 2023-24.  And anything you contribute now is irrelevant as far as 2023-24 is concerned.

Have you used your own car for any business mileage?

Do you expect to make any charitable donations before submitting your return?  That is likely to be your best option for reducing your 2023-24 tax liability.  But won't save you any money overall.

That’s exactly what I thought! Hence my concern at the advice I’m being given. 

Can I make a charitable donation now in December-24 and can it reduce my 23/24 taxable income. 

Any idea why HMRC changed my tax code for no reason?

We often see on the forum, people relying on accountants for financial advice regarding pensions and other matters.
However they are not trained or necessarily well informed in this area.

poseidon1

Elmroad82 said:

I asked earlier today if I could contribute to my 23/24 SIPP and my accountant said “You can pay into your sipp provided the terms allow and apply the amount to 23/24 year”. 

The 100-110k is after pension contributions as it’s taken at source. I’m on income protection insurance as I’m off sick. This covers a percent of my salary.  I have a car allowance. Can I claim fur car maintenance?

I’ve not submitted my 23/24 tax return. My accountant was calculating it and just informed me I have 7k to pay for 23/24 and an estimate of 6k next year. 

I’ve made no charitable gift contributions…

You originally mentioned 'vested shares' of £18k which put me in the mind of executive share options the excercise of which triggers an income tax liability on the difference between the grant price and market value on acquisition.  Was £18k the 'gain' on excercise of the option ( if indeed it was a discretionary executive share option), or the market value when you acquired? Did you keep the shares or sell soon after vesting?

If a substantial chunk of your £7k liabilty referenced the shares, and you have no expectation of the same occuring for 2024/25, then the £6k estimate for this tax year maybe significantly overblown and an application to reduce via your self asssment return should be lodged.

The fact that your 'retired' accountant has not given you a satisfactory reason for your substantial tax underpayment, would be a good enough reason ( in my view)  to find another 'actively' practicing tax accountant who can decipher the basis for your 2023/24  underpayment, and ensure you do not unnecessarily end up overpaying for 2024/25  for a tax event ( share option excercise) that did not in fact reoccur.

2023/24 largely seems ancient history, but the £7k 'interest' free loan you received for that year does not justify you making a similar £6k 'loan' back to the Exchequer. 

sheramber

Elmroad82 said:

Dazed_and_C0nfused said:

Elmroad82 said:

I asked earlier today if I could contribute to my 23/24 SIPP and my accountant said “You can pay into your sipp provided the terms allow and apply the amount to 23/24 year”. 

The 100-110k is after pension contributions as it’s taken at source. I’m on income protection insurance as I’m off sick. This covers a percent of my salary.  I have a car allowance. Can I claim fur car maintenance?

I’ve not submitted my 23/24 tax return. My accountant was calculating it and just informed me I have 7k to pay for 23/24 and an estimate of 6k next year. 

I’ve made no charitable gift contributions…

Is your accountant friendly with Dr Who?  Without a time machine you cannot contribute to a pension in 2023-24.  And anything you contribute now is irrelevant as far as 2023-24 is concerned.

Have you used your own car for any business mileage?

Do you expect to make any charitable donations before submitting your return?  That is likely to be your best option for reducing your 2023-24 tax liability.  But won't save you any money overall.

That’s exactly what I thought! Hence my concern at the advice I’m being given. 

Can I make a charitable donation now in December-24 and can it reduce my 23/24 taxable income. 

Any idea why HMRC changed my tax code for no reason?

Did you contact HMRC and ask them?