HMRC says I owe tax

LoneRanger123

Hi, 
got a letter from HMRC saying I paid too little tax in 23/24.
Had the same job the whole time (as employee) and the payroll dept was doing the payslips (weekly) so no idea how I ended up not paying enough - unless someone messed up somewhere...
Can anyone explain how it happened (assuming HMRC are correct) and how do I prevent it happening again?
Thanks!

Dazed_and_C0nfused

Did you receive a "week 53" payment at the end of the tax year?

The way PAYE works means when this happens your employer has to give you an extra weeks tax code allowances to stop 20% tax from being deducted from the whole of the week 53 payment.

Then when HMRC review things after the end of the year they will arrange for the tax you owe to be paid back.

There is nothing you can do to prevent it really.  But it won't happen every year.  Your employer hasn't done anything wrong, it's just how PAYE works.

You are basically getting an interest free loan from HMRC.

LoneRanger123

No idea about week 53, don't have the payslips to check.
This is the first time (in over 20 years of continuous working) this has happened so it seems rather strange that in never happened before...

nyermen

Easy for small discrepencies to happen.  They can't handle the loss of personal allowance between 100k - 125k either apparently.

But normally for small amounts when only PAYE earnings, dont they just adjust the tax code for next year (basically reduce the personal allowance to account for the extra tax?).

Nomunnofun1

LoneRanger123 said:

No idea about week 53, don't have the payslips to check.
This is the first time (in over 20 years of continuous working) this has happened so it seems rather strange that in never happened before...

Without that it is impossible to say. 

But if you received 53 weeks allowances because there were 53 pay days in the tax year, that’s one week too many. Personal allowance is £12570 or £251 per week. 20% of £251 is £50.20.

saajan_12

Whats your concern - for there's often small mismatches in the tax collected. When its picked up, HMRC would just change your tax code to collect a bit more or less tax to account for it. Unless theres self assessments or declarations you've missed, this isn't your fault and so there would be no interest or penalty on you. 

chrisbur

Almost certain to be caused by week 53.  If your payday was a Thursday or Friday for 23/24 then your last payday for the tax year fell on week 53.  These fall on average about every five and a half years.  There is a figure for tax owed below which HMRC do not bother to collect, I have seen it suggested that £50 is that figure so could explain why you have not had this in the past as you have just gone over that figure.

Nomunnofun1

chrisbur said:

Almost certain to be caused by week 53.  If your payday was a Thursday or Friday for 23/24 then your last payday for the tax year fell on week 53.  These fall on average about every five and a half years.  There is a figure for tax owed below which HMRC do not bother to collect, I have seen it suggested that £50 is that figure so could explain why you have not had this in the past as you have just gone over that figure.

It is indeed £49.99 or less. At one time (ten years ago?) it was as high as £300.