Help!! HMRC randomly dipped in and took 1/4 of my wages

brutal_deluxe

Hi all!

So I was shocked to find my monthly pay reduced by approx 20% (almost 600) this month with my tax code changing from 1147L to K283X. I had no correspondence, no warning whatsoever.

My salary is approx 45,000 per annum
My monthly pay is approx 3000
I have a grand total of approx 135,000 across 3 easy access ISAs; ZOPA, Atom and RCI Bank. I've had this capital a good few years now after I sold my house.
I earn a total of about 450-500 per month in interest (on top of the 3000). 

I logged into my gov account and as far as I understand, it says I owe 600 underpayment due to an *estimated* income from savings or another source. 

HMRC don't give any details as to why or how they calculated this amount.

What I want to know is:
Aren't ISAs tax free?
Is this about right?? And if so,
It should be a one off for this month right?

I'm happy paying what I owe but I don't want it to be an error. 

Any help appreciated!!

BD

eskbanker

Yes, all interest from ISAs is tax-free, so it won't be that, but if you can't identify where the alleged liability arises then you'll need to ask them for details.

brutal_deluxe

There's literally nothing else other than my salary and monthly interest from the three ISAs (two of which I manually transfer) Now I'm really worried. Is it best to call them? 

eskbanker

Calling them isn't for the faint-hearted (or the busy) but is probably the quickest way of finding out!

Can you think of anything that's changed from the previous years?  Have you been using those same ISA providers all along?

cr1mson

Could it be from when the money wasn't in ISAs as you would have had to drip that amount of money into them over a number of years so didn't exceed the annual limit? Or have you accidentally exceeded the annual amount?

brutal_deluxe

There is one thing, I had to transfer a large sum briefly into my current account in order to change to another ISA. Would I be liable for tax on that??

gravel_2

brutal_deluxe said:

There is one thing, I had to transfer a large sum briefly into my current account in order to change to another ISA. Would I be liable for tax on that??

How large? You may have fallen foul of ISA rules as transfers between ISAs are supposed to happen between the ISA providers, not manually via your current account.

eskbanker

brutal_deluxe said:

There is one thing, I had to transfer a large sum briefly into my current account in order to change to another ISA. Would I be liable for tax on that??

You shouldn't be liable to tax simply on the briefly extended balance as such, but when you say 'change to another ISA', does this imply that you were moving money between ISAs via your current account rather than using the direct ISA transfer process?  This could give rise to a tax liability if you exceeded your annual ISA contribution allowance by doing so....

brutal_deluxe

Yes there was no way of transferring between ISAs. The amounts were large but only in my current account for a few minutes? Will they understand this?

eskbanker

brutal_deluxe said:

Yes there was no way of transferring between ISAs. The amounts were large but only in my current account for a few minutes? Will they understand this?

It's not a case of them 'understanding' - if you exceeded your annual ISA allowance by doing this then interest on that money will be taxable after all, as it won't have been a valid ISA subscription.

gravel_2

brutal_deluxe said:

Yes there was no way of transferring between ISAs. The amounts were large but only in my current account for a few minutes? Will they understand this?

There  typically is a way to transfer between ISAs. You tell the new provider to do the transfer and they deal directly with the old provider.

By the rules, if you have withdrawn, let's say, £130k from one ISA into a current account then £130k was removed from the tax wrapper. Assuming you had your annual ISA allowance intact when you then put the £130k into a new ISA then HMRC will have you overpaying £110k into ISAs and it's the interest on that which they can tax.