Old employer messed up, HMRC data wrong - help!

PanPen

This is such a mess and none of it of my making so I need some help. I was off long term sick and hadn't been paid for months when suddenly I got a massive payment in March 2026. I called payroll as even SSP had long since run out. Payroll for some reason thought I'd gone back to work in January so paid me backdated pay into March salary.

Payroll said not to worry keep the money because we owe you a lot of accrued holiday pay, so let's work all that out and you can send back whatever is still an overpayment. Obviously this massive 'salary' also meant I was heavily taxed.

But a few days into April I was terminated on ill health grounds, so then was due payment in lieu of notice and all that holiday pay. Payroll worked it all.put and paid me the bit left over in April's salary. But an evening larger amount got taken off in tax again.

But no corrected documents received. Suddenly I've had a letter from HMRC saying I owe £££ as I hadn't paid enough tax. So back on to company to try and sort it, they finally sent.out a revised P60 for last year and P45 for this year but god knows what they have told HMRC because they haven't updated my PAYE data so it's all still wrong and I'm still being chased.

So, tax code for last year 1257L and employment and ESA benefit in total still keeps me under 12,570 so presumably I shouldn't have paid any tax, s somehow I have to get that sorted.

But for 2026-2027 I have been given a 880T code for employment and 374T for DWP. However I obviously wasn't employed after mid April so my final salary payment and holiday pay was about £7400 all received in April. Should I have paid tax at all? Because the now ex employers took around £1900 off of that. Surely if that was my tax code with them in April 2026, then a final salary payment of £7400ish shouldn't have been taxed?

I won't be working again because of ill health and I've just starting receiving Support Group, so I don't know what is going to happen now. But feel like ex employers have reay messed me up. I'm down £1900 in tax already for this year and being chased for money I don't owe to HMRC too.

SiliconChip

It sounds a mess, but to answer your specific question in the second to last paragraph, the tax of £1900 is not too far wrong for a month 1 payment of £7400 as the tax will be calculated as if you'll receive that amount every month (equivalent to an annual income of £88,800), so with a tax code of 880T your month 1 tax would be £628 at 20% rate and £1410 at 40% rate for a total of £2038 (plus NI deduction £315 if that was also taken). The difference to £1900 could be due to things like pension payments.

Because you won't receive any more payment from employment you'll be owed all (or most depending on whether your DWP payments are taxable and how much they will total over the tax year) of it back. The complication of course is that HMRC think you owe them tax for previous years so they'll want to use what they owe you to offset the debt, so you really need to get the whole thing resolved, at which point you should be able to get a lump sum repayment of the balance that is owed to you.

sherlock228

please can you set out a clearer timeline

in 25/26 you off sick and were not in receipt of sick pay from your employer. SSP had also ended but any received in 25/26 counts as taxable income.

You were paid 3 months salary in March 26 which was a total error by payroll. What tax code was applied to that payment because that close to tax year end because if on a cumulative code, the March pay run should have given you 11,522 free pay.
So were you on a month 1 code for that payment (hence the "heavy tax" if 3 month's pay only received the month 1 free pay basis)?
What was the taxable pay year to date at that payment?

The correction to that above appears to have taken place in April's pay run, so next tax year. Your 7,400 received in April therefore should only have received 1 month's free pay.

Was the 880T code applied to the April pay run? If yes then the employer had no option but to follow a code issued to it by HMRC. If not, then what code was used?

You need to sort this out with HMRC, the employer appears to have followed what it is legally required to do regarding codes to be used.

Have you followed this process:

Check how to claim a tax refund - GOV.UK

PanPen

Sorry I know it's very complicated and was hard to make clear. I'll try again.

1st January 2026 SSP ends

March 2026 on 1257L tax code I am wrongly paid £5300ish when it should have been about £1200 which would have left me having earned no more than about £11,200 for 25/26.

I contacted company at once and they sent me corrected figures but no amended payslip and clearly nothing to HMRC. They said to hold the money while they sorted everything out and then would contact me to arrange return of overpayment.

April 2026 - terminated on ill health grounds, it appears I was on a 1133T/0 tax code and was owed around £7400 and taxed around £1900. Before sending me the final salary owed they deducted the amount I was holding ready to give them back.

May 2026 - I started getting letters from HMRC hassling me for under paid tax for last year. I contacted ex employers who said they had sent corrected figures to HMRC so they can't understand this but will call them .

June 2026 and July more letters asking for tax from HMRC. So I contact HMRC who say they have heard nothing from ex employer so I owe this money. I contact ex employer and say - I have never had a corrected payslip for March 2026, never had a P60 or P45. I'm sent these so I call HMRC back and correct figures online. But I am still being hassled. HMRC demanding I write letters with proof.

But online HMRC now showing tax code of 880T for employment and 374T for DWP

PanPen

Hi @sherlock228 yes I tried the link you mentioned previously but because I now get ESA it says I can't do it via that link

eskbanker

I got a massive payment in March 2026. […] Obviously this massive 'salary' also meant I was heavily taxed.

March 2026 on 1257L tax code I am wrongly paid £5300ish when it should have been about £1200 which would have left me having earned no more than about £11,200 for 25/26.

May 2026 - I started getting letters from HMRC hassling me for under paid tax for last year. I contacted ex employers who said they had sent corrected figures to HMRC so they can't understand this but will call them .

Putting aside the issue of what should have happened, if you were overpaid in 2025/26 and were correspondingly 'heavily taxed', why do HMRC assert that you underpaid tax, i.e. have they shown their workings and do you contest any of the figures they've shown?

But online HMRC now showing tax code of 880T for employment and 374T for DWP

Do you have the option of adjusting the expected total 2026/27 income from each of those within the online portal?

sheramber

HMRC will not change the figures on your say so.

Your ex employer needs to advise them of the correct amounts.

Your code number for 26/27 will include a deduction for projected ESA income for the year, as it cannot be taxed at source. That appears to be £3740 , leaving £8800 personal allowances against any other income, hence code 880T.

HMRC cannot do an inyear repayment while you are in receipt of a taxable benefit.

PanPen

https://forums.moneysavingexpert.com/discussion/comment/82096395#Comment_82096395

Yes I disagree with their working out because they have still have it down as me earning about £4000 more than I actually did because they haven't changed the 25/26 incorrect total originally provided by the ex employer. Work said they have sent corrected figures in late April and again in June, work also phoned and spoke to someone in July but HMRC haven't updated their figures so far. Surely it shouldn't take this long?

I get they won't change it just on my say so, but I have proof by way of the re issued P60, so I'm not just plucking figures out of the air. If work have told them several times and I've told them and provided evidence I don't understand how they are still pursuing me for underpaid tax. Looking at it I think really I should be getting some tax back for 25/26.

Going onto the current tax year HMRC definitely won't do an in year refund even though I've stopped working and I've been awarded ESA Support Group?

sheramber

Lodge a complaint

https://www.gov.uk/complain-about-hmrc

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82096774#Comment_82096774

It was a different point I was making, i.e. ignoring the fact that your pay was more than it should have been, how have they concluded that you've underpaid tax on the inflated sum?