Can HMRC take money out of my wages?

DaffyDuck316

Hi everyone.

I just thought I'd ask if HMRC can take money from my wages?

I'm currently on a payment plan because I underpaid tax one year.

But just now about £500 got taken from my wages because I underpaid tax on another year.

This feels a bit harsh, I can hold my hand up and understand I didn't pay enough tax but I do need money to live on at this time as well.

eskbanker

Yes, they are entitled to collect tax from wages, as it's taxable income - it's what PAYE is designed for!  There is a limit to how much they can collect that way, how much of your pay is being deducted to repay what you owe?

moneytorques

eskbanker said:

Yes, they are entitled to collect tax from wages, as it's taxable income - it's what PAYE is designed for!  There is a limit to how much they can collect that way, how much of your pay is being deducted to repay what you owe?

This collection will have been done via a change to your personal tax code, these are normally notified to you in advance of any deductions, via email and on the HMRC App notifications and full explanation is provided on your HMRC account online.

DaffyDuck316

eskbanker said:

Yes, they are entitled to collect tax from wages, as it's taxable income - it's what PAYE is designed for!  There is a limit to how much they can collect that way, how much of your pay is being deducted to repay what you owe?

Well I normally get around £1000 after usual tax deductions but this month I got under £500

I did get an explanation and a tax code change but it feels a bit much when I'm already paying back £150/month from a different tax year. 

eskbanker

DaffyDuck316 said:

eskbanker said:

Yes, they are entitled to collect tax from wages, as it's taxable income - it's what PAYE is designed for!  There is a limit to how much they can collect that way, how much of your pay is being deducted to repay what you owe?

Well I normally get around £1000 after usual tax deductions but this month I got under £500

I did get an explanation and a tax code change but it feels a bit much when I'm already paying back £150/month from a different tax year. 

They're not meant to take more than half of your gross pay as tax in any month.

If you'd already negotiated a payment plan for previous arrears then it might have been viable to do the same this time round to, if you'd contacted them as soon as you'd received your revised coding notice - what has actually caused all the underpayments anyway (this would normally be other income streams that aren't covered by PAYE)?

DaffyDuck316

Oh that's curious, maybe they took exactly half.

I did get a letter saying they would be adding £477 to my paycheck. Foolishly I thought it meant they were giving me money like a rebate.

The underpayments were because I had two permanent jobs, then I quit one of the jobs and signed up with an agency, and shortly after got another permanent job. So in theory I had three jobs for a short while as I was still signed on with the agency as a backup. It must have caused some confusion to how I was being taxed I suppose 

eskbanker

DaffyDuck316 said:

I did get a letter saying they would be adding £477 to my paycheck. Foolishly I thought it meant they were giving me money like a rebate.

I suspect that what they were actually saying was that they'd be taxing you on the basis that you'd earned an additional £477 (or that you'd underpaid tax by that amount), so yes, that's increasing tax deducted and reducing net income, not the other way round!

DaffyDuck316 said:The underpayments were because I had two permanent jobs, then I quit one of the jobs and signed up with an agency, and shortly after got another permanent job. So in theory I had three jobs for a short while as I was still signed on with the agency as a backup. It must have caused some confusion to how I was being taxed I suppose 

Yes, sounds likely that something would have fallen down the cracks there, but you should be able to see from P45s and P60s what your gross taxable income was across the different employments and how much tax you paid, which should all have been reflected in the P800 document issued by HMRC, showing total income, total tax due and total tax deducted.

DaffyDuck316

Hmm ok, thanks for your comments. I'll investigate my P45's and P60's to make sure everything is correct and getting back on track.

DaffyDuck316

I hope it is Ok to post this picture, I can't see any Personal Details on it.

I'm concerned with Note 3 and Note 6.

I can understand HMRC wanting to recoup their money as stated in Note 3.

My concern is that from note 6 I am going to get taxed 40% for earnings over £37700. Normally I get taxed 20% for the year with earnings around £50,000/year. It sounds like I earn a lot, but I live on my own, give money to my mum, and work a huge amount of hours to be in the position I am in. It doesn't seem fair to get taxed 40%

molerat

What code have they allocated ?  You get taxed at 40% from £37700 above your allowance.  You will be paying 40% on your income below £37700 though as your allowance is now negative.  What do you expect your total income from all sources will be ?  You need to ensure your on line tax account shows the correct estimated income for each stream, if it is showing the wrong amount that can cause the codes allocated to be incorrect.

DaffyDuck316

I was on a 238T W1M1 and a 1224L, which in the last two months has become a 550L where half my wages were taken out of the 550L job for two months running.

The letter I got says I will be on a BR and a K46 from April onwards

I don't know if that makes any sense.

I think I owe the £2000 from 2022/23

I'll check my estimated incomes. They seem correct, but I am seeing an 87L now instead of a K46. Could that be because they took half my wages it has gone from a negative K to a positive L?

I feel like this 40% tax bracket is a bit unfair, but on the HMRC online it says I should only get taxed at 40% for anything over £50k-ish. So I'll stop worrying about that for now. But I still don't understand why they are taking half of my wages if I have a repayment plan in place. Could it be because I have a house deposit in my bank account? I'm so confused with it all, and I don't think the W1M1 has been there the whole time either, I don't understand it.