Help with PAYE please? Freaking out.

hogmanayhell

Firstly Happy Nee Year everyone!

Looking for some guidance if anyone can please. I stay in Scotland and have got myself in a huge pickle with tax due to limited understanding and stupidity and trying to fix it.

Current situation:

2 ongoing direct debits with HMRC.

1. Simple Assessment from several years ago where I had the same tax code applied to both jobs in error. Paid at £20 per month. Still a long time left to clear but because Simple Assessment no interest being charged and HMRC error (they knew for 2 years about both jobs), they’re not pushing for faster recovery.

2. High Income Benefit charge from 2.5 previous years paid at £100 per month. Will be cleared by Jan 27.

This year I’m predicted to earn around £114k and I’ve just completed my self assessment to have the HIBC come off at PAYE. Now that I’m aware of the requirement I’ve tried to be more proactive. 

Sadly, I was unaware of the removal of personal allowance. The impact of this is I’ve been given an SK2400K code for what I presume is Jan, Feb, Mar and according to ChatGPT I’m getting conflicting advice on what my take home will be for the final 3 months. It’s looking like it could be £1300 lower than I originally envisioned. My issue is that funds in Jan and Feb are urgently needed for a new car and most of the £114k this year predicated is made of overtime I’m not guaranteed for these final 3 months.

If I call HMRC will they consider:
A) restoring me to my normal tax code for these final 3 months and let me sort it out from April?

consider allowing me to be spreading this over 24 months? I realistically won’t earn over £100k again in the next few years (it was a special project at work) and my income is going to significantly reduce in the very near future.

Thanks for all your help in advance everyone.

I’m not trying to dodge tax, just trying to offset the impact of my naivety a little. 

Vitor

I suggest you wrote to HMRC and make these points -
– Explain that income for the rest of the tax year is uncertain and overtime is not guaranteed.
– Ask for the income estimate to be revised downward to a realistic minimum.
– Ask for the HIBC to be removed from the PAYE code and dealt with through Self Assessment instead.
– Accept that some tax may be due later, but prioritise avoiding severe short-term over-collection.
HMRC is generally more receptive when the request is framed around accuracy rather than hardship.

hogmanayhell

Hi Vitor,

Thank you, that’s the plan. I’m going to call them tomorrow but I’m worried sick and scared I’ve going to be chastised by HMRC and also going to be wiped out Jan to Mar when I need to pay balloon payment for the car.

From what I can tell reading HMRC manuals online it looks like they’ll allow me to move the IYA to CY+1 (so potentially April for either 12, or hopefully 24 months). This would make it affordable for me. If I take the HIBC into the Self Assessment I can potentially even pay that this at end Jan as I can sell the car and get a run around. So really it would then just be about the PAYE.

Does this sound realistic? From what I’ve experienced with HMRC before, they’re prepared to work with people but I’m not sure if they’ll assume I’m mega rich and have lots of disposable (when that situation is rapidity changing). I’m not trying to avoid anything, just trying to fix things. 

MattMattMattUK

hogmanayhell said:

Firstly Happy Nee Year everyone!

Looking for some guidance if anyone can please. I stay in Scotland and have got myself in a huge pickle with tax due to limited understanding and stupidity and trying to fix it.

Current situation:

2 ongoing direct debits with HMRC.

1. Simple Assessment from several years ago where I had the same tax code applied to both jobs in error. Paid at £20 per month. Still a long time left to clear but because Simple Assessment no interest being charged and HMRC error (they knew for 2 years about both jobs), they’re not pushing for faster recovery.

2. High Income Benefit charge from 2.5 previous years paid at £100 per month. Will be cleared by Jan 27.

This year I’m predicted to earn around £114k and I’ve just completed my self assessment to have the HIBC come off at PAYE. Now that I’m aware of the requirement I’ve tried to be more proactive. 

When you say "this year" do you mean 24/25 or 25/26, I am guessing for the just completed self assessment you mean 24/25 as you FY25/26 is not yet finished. How much do you put into your pension?

hogmanayhell said:

Sadly, I was unaware of the removal of personal allowance. The impact of this is I’ve been given an SK2400K code for what I presume is Jan, Feb, Mar and according to ChatGPT I’m getting conflicting advice on what my take home will be for the final 3 months. It’s looking like it could be £1300 lower than I originally envisioned. 

That code means you are getting £24k of extra taxable benefits a year, are you? The trailing K means it is taxed on a one month basis rather than cumulative. What do you expect to earn in each of those three months net of pension contributions and what are your taxable benefits? How much have you already earned, pension and taxable benefits?

hogmanayhell said:

If I call HMRC will they consider:

A) restoring me to my normal tax code for these final 3 months and let me sort it out from April?

They will not, but they may be willing to align it with your expected earnings, so lower it slightly, but without details of actual earnings it is hard to tell. 

hogmanayhell said:

consider allowing me to be spreading this over 24 months? I realistically won’t earn over £100k again in the next few years (it was a special project at work) and my income is going to significantly reduce in the very near future.

No they will not, not for PAYE. What do you expect to earn in FY 26/27?

hogmanayhell said:

Thanks for all your help in advance everyone.

I’m not trying to dodge tax, just trying to offset the impact of my naivety a little. 

I doubt anyone things you are trying do dodge tax, do not worry.

hogmanayhell said:

My issue is that funds in Jan and Feb are urgently needed for a new car and most of the £114k this year predicated is made of overtime I’m not guaranteed for these final 3 months.

Unfortunately that is not HMRC's problem, they will not care. You will either need to postpone buying the car, buy a cheaper car or finance it by other means.

You also need to start to do some proper tax planning, someone earning £100k or more absolutely needs to properly plan for tax, mitigating it by increasing pension contributions, using ISAs for savings etc. and even people on anything over £50k need to take reasonable consideration for it. If you are going to be earning over the Child Benefit threshold long term it also makes sense to stop claiming it in the first place. 

Dazed_and_C0nfused

hogmanayhell said:

Firstly Happy Nee Year everyone!

Looking for some guidance if anyone can please. I stay in Scotland and have got myself in a huge pickle with tax due to limited understanding and stupidity and trying to fix it.

Current situation:

2 ongoing direct debits with HMRC.

1. Simple Assessment from several years ago where I had the same tax code applied to both jobs in error. Paid at £20 per month. Still a long time left to clear but because Simple Assessment no interest being charged and HMRC error (they knew for 2 years about both jobs), they’re not pushing for faster recovery.

2. High Income Benefit charge from 2.5 previous years paid at £100 per month. Will be cleared by Jan 27.

This year I’m predicted to earn around £114k and I’ve just completed my self assessment to have the HIBC come off at PAYE. Now that I’m aware of the requirement I’ve tried to be more proactive. 

Sadly, I was unaware of the removal of personal allowance. The impact of this is I’ve been given an SK2400K code for what I presume is Jan, Feb, Mar and according to ChatGPT I’m getting conflicting advice on what my take home will be for the final 3 months. It’s looking like it could be £1300 lower than I originally envisioned. My issue is that funds in Jan and Feb are urgently needed for a new car and most of the £114k this year predicated is made of overtime I’m not guaranteed for these final 3 months.

If I call HMRC will they consider:
A) restoring me to my normal tax code for these final 3 months and let me sort it out from April?

consider allowing me to be spreading this over 24 months? I realistically won’t earn over £100k again in the next few years (it was a special project at work) and my income is going to significantly reduce in the very near future.

Thanks for all your help in advance everyone.

I’m not trying to dodge tax, just trying to offset the impact of my naivety a little. 

Is direct debit 2 being used to clear Self Assessment liabilities (arising from HICBC) or were you investigated for failing to submit Self Assessment returns relating to HICBC liability?

You also seem to be conflating two things.  Your new tax code will almost certainly only be trying to collect as much tax as possible for the current tax year.  And that is likely to be a direct result of how you completed your own Self Assessment.

How much does your 2024/25 Self Assessment calculation show your 2024/25 liability was (the very bottom line of the calculation, after PAYE tax paid at source has been deducted)?

There is no "normal" code in your situation.  But if you are continuing in Self Assessment you can ask for the HICBC entry to be removed from your 2025/26 tax code.  And you can provide a more realistic estimate of your estimated earnings, which will be a major factor in what your Personal Allowance will be estimated as.

Remember tax code are only ever provisional, the final position is resolved via your tax return.

Re the 24 months comment.  What exactly are you thinking you could include in the 24 months?

hogmanayhell

So DD 1 is for an issue from pre-Covid when I had two jobs and these were both given a tax free allowance. Because I had notified HMRC prior this isn’t being actively pursued and they’re content with £25 a month - this was for Simple Assessment not Self Assessment.

DD2 is when I realised I needed to pay HIBC, I self reported and had 30 months of HIBC to clear which is being recovered at £100 a month.

The reality is I don’t know what I’ll earn Jan to Mar as can only guarantee my base wage, the additional payments are consultancy rates and client dependant. All that is guaranteed is my base wage (which takes me closer to £60k a year). Will they accept my base and then work things out from April instead because of the volatility? I can send them payslips as proof.

You’re right, the tax code is effectively them trying to recover the additional amounts by end-year for this current tax year (25/26). My portal shows around £44k Income Tax liability for the year. I have SMART Salary pension at around £150 a month and £120 healthcare (taxable).

The only reason I’m in self assessment is due to the HIBC.

hogmanayhell

@Dazed_and_C0nfused - I guess my hope is if I pay the 24/25 HIBC in Jan in self assessment, they’ll allow me to defer the In Year Adjustment to CY+1 and then spread the extra tax due as a result of my loss of personal allowance over 2 PAYE years? I’ve previously had an underpayment many years ago recovered over 24 months.

Dazed_and_C0nfused

hogmanayhell said:

So DD 1 is for an issue from pre-Covid when I had two jobs and these were both given a tax free allowance. Because I had notified HMRC prior this isn’t being actively pursued and they’re content with £25 a month - this was for Simple Assessment not Self Assessment.

DD2 is when I realised I needed to pay HIBC, I self reported and had 30 months of HIBC to clear which is being recovered at £100 a month.

The reality is I don’t know what I’ll earn Jan to Mar as can only guarantee my base wage, the additional payments are consultancy rates and client dependant. All that is guaranteed is my base wage (which takes me closer to £60k a year). Will they accept my base and then work things out from April instead because of the volatility? I can send them payslips as proof.

You’re right, the tax code is effectively them trying to recover the additional amounts by end-year for this current tax year (25/26). My portal shows around £44k Income Tax liability for the year. I have SMART Salary pension at around £150 a month and £120 healthcare (taxable).

The only reason I’m in self assessment is due to the HIBC.

I'm guessing you have missed a zero out of the pension figure?

In the short term you can ask for your previous choices for 2025/26 to be revised.  If you are happy continuing to file Self Assessment returns then you can ask for the HICBC entry to be removed from your 2025/26 tax code.

You can also provide a realistic estimate of your 2025/26 earnings i.e. the figure your expectations to see on your 2025/26 P60 next April. 

HMRC will not accept a figure that is patently too low.  Your starting point is the taxable pay figure from your latest payslip then add what you expect to see on your remaining payslips for this tax year.  That is a viable figure to use. And will be used to estimate your Personal Allowance for 2025/26.

If you end up earning more then that will come out in the wash when you file your 2025/26 tax return. 

Dazed_and_C0nfused

hogmanayhell said:

@Dazed_and_C0nfused - I guess my hope is if I pay the 24/25 HIBC in Jan in self assessment, they’ll allow me to defer the In Year Adjustment to CY+1 and then spread the extra tax due as a result of my loss of personal allowance over 2 PAYE years? I’ve previously had an underpayment many years ago recovered over 24 months.

You certainly know how to keep things complicated.  Why don't you just ask for the HICBC entry to be removed from your 2025/26 tax code and provide a new (sensible) estimated earnings figure on which your Personal Allowance will (largely) be based.

Those two things are likely to result in an automatic reduction to the In Year Adjustment.

hogmanayhell

So if I say to HMRC I believe that I won’t receive any more overtime (quite likely) they may accept that and then fully assess in April at which point if I’m still due the tax then they will look to amend my code for 26/27? I don’t think I need to wait until my 25/26 tax return to start repaying? I’m always PAYE. I can then hopefully stretch this code recovery over 2 years?

hogmanayhell

@Dazed_and_C0nfused - you’re right I am probably not helping myself but I’ve basically got worry in Jan to Mar I’m going to drop to base pay and be paying tax as if I’ve got higher income which I can’t afford (because it’ll be way below what my tax home would normally be even without overtime). I get that’s not HMRCs issue though and it’s for me to fix.