HMRC underpayment, HMRC taxing me way too much for a year

moneysavingmum21

Hi, I'm a working mum and got a P800 letter at the end of last year stating I owed some money due to untaxed interest on savings.

It was about £590 and I agreed for HMRC to take it out my pay. First of all they changed my personal allowance to 680 which cut my pay massively. I had to call them to advise that I no longer have the savings which the interest was on (it was used for a house purchase in the previous tax year). They updated my personal allowance to about 900 and advised that was because I still needed to repay the underpayment which was fine.

So my pay is now £300 less a month until April 2027 to pay back a £590 underpayment.

I called up yesterday and said as I've been paying £300 for a 3 months now I must have paid off the underpayment (and more).

I asked them to change my tax code and they said they couldn't. I would just have to pay £300 a month from my pay and wait for a refund in April 2027.

I can't afford to do this with the costs of the mortgage and childcare. She said my only other option is to pay the £590 manually and this would prompt my tax code to be reviewed and a refund issued earlier.

She couldn't say when. I checked the app and it wouldn't allow me to pay because it showed nothing due because it was already paid from my pay.

Instead she gave me bank details to pay into so I paid the money. Did I do the right thing? Does anyone know how quickly tax codes are reviewed after this happens? Because now not only am I £300 down a month, Ive also lost some of my savings to pay something that was already paid off!

I really don't like the attitude of HMRC that it's reasonable to ask working people to just wait for a refund whilst they continue to tax you an incorrect amount. I'm relying on that money to pay my families bills.

Isthisforreal99

Is it not a case of them collecting the underpayment via your tax code and assuming you would continue receiving the interest this year and also including this in your tax code?

MeteredOut

Do you have an HMRC online personal account? Go in there and see if it still has the wrong expected interest. If so, update that and it should trigger a new tax code for you.

Woodstok2000

Are you sure all your numbers are correct? The tax free allowance as standard is £12570 (tax code 1257). If you completely removed your tax free allowance you would pay 20% tax on that amount, which would be about £210 per month. A tax code of 900 implies you have a tax free allowance of £9000. That would mean you are paying 20% tax on an extra £3570, which comes to £714, or £60 per month.

I don't see how your tax code on its own has resulted in you losing £300 per month, there must be something else going on?

sheramber

What is your monthly taxable pay?

What is your full code number, including all suffixes?

What is the total tax deducted?

Albermarle

A tax code of 900 implies you have a tax free allowance of £9000

OP - Can you clarify exactly what your tax code is - normally there is also a letter at the end.