Self assessment tax bill of 7k!!

mybestattempt

The focus of this thread has been a 2023/24 tax underpayment and what appears to a substantial coding allowance for employment expenses which, it seems, were not allowable in that year.


If I read the OP's posts correctly it seems the same tax code was applied in 2022/23 but no self assessment has been filed for that year.

It strikes me that there is potentially a significant underpayment of tax for 2022/23 as well as 2023/24.

After reviewing earlier years the new accountant should be in a position to advise @Elmroad82 of the extent of all issues to be resolved.

Elmroad82

saajan_12 said:

Elmroad82 said:

Hi, would you mind elaborating a bit more please? What does 2665T mean and what are the extra things are provisionally included?
With reference to taking my eye off the ball..how do I keep my eye on the ball and make sure this doesn’t happen again?
I assumed that as tax had been calculated correctly in 22-23 and the tax code hadn’t changed,  that with a reduction in income in 23-24 the tax would again be calculated correctly. Is there anything I could have done to foresee this? 

Well most people have a 1257L tax code, meaning they have a tax free allowance of around 12,570 (the last digit is not accurate) due to the standard personal allowance. If you earn over 100k, your personal allowance should reduce so the number should go down. If you get other benefits or put money into your pension, etc etc then the number could change.

Yours at 2665T is double the standard allowance for some reason - we can't say why and whether those reasons still apply. Since you're earning over 100k, you should start losing some of the 12k allowance. So the difference in tax code could be quite large - essentially you haven't had tax deducted on 26k of income over the year, and now have to pay the tax on some of that (you may retain some allowance). 

What you could do next time is keep an eye on the tax code, and find out why its changed as soon as it does - if not valid, then asking HMRC to correct at the time could ensure the monthly tax deducted remains in line and you don't have a big difference (either way) at the end. BTW did you not notice the amount coming in your bank account changed even if the pay slip was too difficult to read?

I spoke to HMRC - looks like my employer changed my tax code which I'm asking them to investigate. I'm not sure why they did this.  

I increased my pension contribution and was eligible for a share save scheme around the same time my tax code changed. As there were quite a few changes to the way I was being paid, it wasn't immediately obvious. All I could see was that I was being paid less than previously due to an increase in my pension contribution and a share scheme so assumed it was being calculated correctly. 

Elmroad82

Having spoken to HMRC I will need to pay the tax back.. let's say I owe 7k which would have originally been taken pre tax or £580 per month gross? If I have to pay this back I'll have to pay out of my salary which is £580 AFTER tax. Therefore is this now costing me at least £7000 + 20% tax? 8400?

[Deleted User]

Elmroad82 said:

Having spoken to HMRC I will need to pay the tax back.. let's say I owe 7k which would have originally been taken pre tax or £580 per month gross? If I have to pay this back I'll have to pay out of my salary which is £580 AFTER tax. Therefore is this now costing me at least £7000 + 20% tax? 8400?

An unusual logic. 

You have underpaid £7000 in tax - your net pay was £7000 too high. You now have to repay £7000 - your net pay will decrease by £7000.

Elmroad82

I’m not sure I understand. I paid 25k tax from my gross salary but based on calculations I should have paid 32k from my gross salary. HMRC won’t take the 7k from my gross salary as they normally would as they want it via bank transfer so paying HMRC from my take home net pay means I’m paying tax before I pay the 7k back?

[Deleted User]

Elmroad82 said:

I’m not sure I understand. I paid 25k tax from my gross salary but based on calculations I should have paid 32k from my gross salary. HMRC won’t take the 7k from my gross salary as they normally would as they want it via bank transfer so paying HMRC from my take home net pay means I’m paying tax before I pay the 7k back?

OK - simple example. 

Your gross is £20000 and you paid tax of £486. NIC was, say, £1000. Your take home is £18514. 

This tax is wrong - it should have been £1486. Your take home should have been £17514. 

You owe HMRC £1000 out of your net salary. An extra £1000 was paid into your bank account!  You got an extra £1000. HMRC got £1000 too little. 

TheSpectator

Elmroad82 said:

I’m not sure I understand. I paid 25k tax from my gross salary but based on calculations I should have paid 32k from my gross salary. HMRC won’t take the 7k from my gross salary as they normally would as they want it via bank transfer so paying HMRC from my take home net pay means I’m paying tax before I pay the 7k back?

So you want tax relief on your tax bill? 

That's new.

Elmroad82

TheSpectator said:

Elmroad82 said:

I’m not sure I understand. I paid 25k tax from my gross salary but based on calculations I should have paid 32k from my gross salary. HMRC won’t take the 7k from my gross salary as they normally would as they want it via bank transfer so paying HMRC from my take home net pay means I’m paying tax before I pay the 7k back?

So you want tax relief on your tax bill? 

That's new.

Isn’t income tax taken from gross salary?  If Id overpaid tax, I’d get a cheque from HMRC that’s a gross amount - I’m not taxed on it so doesn’t the same apply? What am I missing?

TheSpectator

Elmroad82 said:

TheSpectator said:

Elmroad82 said:

I’m not sure I understand. I paid 25k tax from my gross salary but based on calculations I should have paid 32k from my gross salary. HMRC won’t take the 7k from my gross salary as they normally would as they want it via bank transfer so paying HMRC from my take home net pay means I’m paying tax before I pay the 7k back?

So you want tax relief on your tax bill? 

That's new.

Isn’t income tax taken from gross salary?  If Id overpaid tax, I’d get a cheque from HMRC that’s a gross amount - I’m not taxed on it so doesn’t the same apply? What am I missing?

Say in your case your earnings were £100,000 and you paid £25k tax. Ignoring NIC your take home would be £75k. Because of your incorrect tax code you should have paid £32k taking home £68k. Paying £7k back puts you in the position you should have been no?

[Deleted User]

TheSpectator said:

Elmroad82 said:

TheSpectator said:

Elmroad82 said:

I’m not sure I understand. I paid 25k tax from my gross salary but based on calculations I should have paid 32k from my gross salary. HMRC won’t take the 7k from my gross salary as they normally would as they want it via bank transfer so paying HMRC from my take home net pay means I’m paying tax before I pay the 7k back?

So you want tax relief on your tax bill? 

That's new.

Isn’t income tax taken from gross salary?  If Id overpaid tax, I’d get a cheque from HMRC that’s a gross amount - I’m not taxed on it so doesn’t the same apply? What am I missing?

Say in your case your earnings were £100,000 and you paid £25k tax. Ignoring NIC your take home would be £75k. Because of your incorrect tax code you should have paid £32k taking home £68k. Paying £7k back puts you in the position you should have been no?

I tried that scenario earlier - didn’t seem to work!