What action to take after incorrect calculations by HMRC re salary reduction

Wobble101

I've had a message from HMRC about my estimated income tax for 26/27, saying that it will be significantly lower than what I will pay for 25/26. Looking back at my income tax history this seems to have been triggered by my employer reporting me as having left the organisation at the end of May 2025, but then having started again in June 2025. My 26/27 estimate is then based only on the salary paid since June.

None of this makes any sense to me. I didn't leave my employer in 2025, and even if I did, it seems odd to assume that my salary the next year would equal my salary for the partial year that preceded it.

The irony is that, unknown to HMRC, I AM leaving my employer this July (to retire). So my question is whether I should try and resolve this issue or just ignore it, and then let HMRC know once I have left. I note that if I click on the 'update your estimated income' link it specifically says don't tell us if you are going to leave the organisation (not in those words, but with that intent).

Any thoughts on the pros and cons of this would be very welcome. Regardless of this I will get in touch with my firm's payroll to query why I'm down as leaving and then joining, in case that causes problems later on with pensions or something.

eskbanker

What have your monthly payslips shown as cumulative figures for salary and income tax deductions, and to what extent do these square with what HMRC are advising?

DRS1

Is the fact that you are going to leave in July 26 going to impact your taxable income for 25/6? 25/6 ends on 5 April.

How does the HMRC figure for your income this tax year compare to your payslips? I assume they give a cumulative total for tax paid this tax year?

Wobble101

Doh. My apologies - I put down the wrong tax years. I've now corrected my post. Will check the payslips - that's a good call.

Wobble101

This is to do with our payroll system switching from a previous system to a new one. The first payslip on the new system does not include a correct year to date amount; it just starts as though this was my first payslip from that employer. I've found some Q&As that say there will be no issues with HMRC as a result of this.

@DRS1 The amount HMRC quote as my estimated income from employment next year (26/27) is significantly lower even than the amount you would calculate based on the partial salary.

So I think the only issue is whether I need to do anything to notify HMRC that they have the wrong details.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81911163#Comment_81911163

This may well be the result of the seemingly odd information your employer has sent to HMRC.

Does your Personal Tax Account show you as having two jobs in the current tax year (one that has ended and one still going)?

You would probably be best off updating your estimated earnings for the forthcoming tax year to what would be a realistic figure for the whole year. If you do end up retiring as currently expected then your figure will be updated to your P45 details but it will be accurate in the meantime.

Wobble101

@Dazed_and_C0nfused Yes, exactly - I’m recorded as having one job with my employer that ended in May 2025 and a current one that began in June.

I think that is what I’ll do - calculate the total of my salary in 26/27 plus my pension and submit that.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81911210#Comment_81911210

You shouldn't add your pension, it is the figure for the employment that is needed.

Wobble101

Thanks @Dazed_and_C0nfused. Can I ask, why would I not add in my pension earnings? If they are not included would that not mean I underpay tax on my final months of salary?

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81911559#Comment_81911559

I thought this was a pension that hasn't started yet?

If so you wouldn't be telling HMRC anything about it yet, you wait for the pension company to notify HMRC and then you can update the estimate for that source of income (if necessary).

Basically you look at each income source separately.

molerat

HMRC will be notified when the pension starts so you don't need to tell them, all you would need to do is ensure all estimated incomes are correct when your account is updated. If you only have a single income stream then unless the income range affects coding adjustments then it doesn't really matter what is shown in your tax account, PAYE will plod on correctly anyway.

For instance I know that my 3 26/27 income streams currently show incorrect amounts but the codes allocated are correct for my actual situation and the rate band adjustments cancel each other out, I also know that when I correct those amounts it will have no effect on the codes but will change the rate band adjustments which will still cancel each other out.