Unaffordable personal tax bill

Jamezon · 19 April 2018 at 9:43PM

A bit complex (for me) be glad if anyone can help...
An error (on my part) meant I underpaid tax via self assessment in 2016/17.

Long story short I mistyped my employment expenses in 2015/16... In turn this enhanced my tax code and dropped my tax contributions. Granted I should have twigged faster but regardless, I was shocked when I completed my 2016/17 return recently and received a bill >£5k!

This was then compounded as when I contacted HMRC PAYE to correct the offending tax code, at the fourth time of asking they have decided I owe a further £4k through my 2018/19 code to cover underpayment of tax in 2017/18.

I had initially contacted SA to set up a payment plan for the original amount in late January. However they said they could not do this without my net income. I explained I could not determine this as my tax code was wrong. They basically told me to phone back when I knew. Further to this PAYE advised they would not know my tax code (to calculate net earnings) until my P60 was received. Today as it happens.

By coincidence I also received a second demand for payment billed as my 'final chance' to avoid DCA today, dated 11th. I phoned SA regarding this letter and they said my account was potentially going to be passed to DCA.

I explained in all likelihood I would not know my net wage until late May but all they could say was 'i'll take a note'.

I am concerned that a) I have £9k debt in tax, b) this might be pursued by separate parties (SA DCA and via PAYE) and c) this figure is completely unaffordable in HMRC conventional repayment timescales. For example the £4k PAYE debt alone will depress my wage by £400 a month for the next year, putting me well into the red for monthly budget.

Basically I want any help or advice on my best angle of attack, if it's possible to merge the debts and how to reduce the repayments. If anyone has template letters or Income and Expenditure forms that would be great.

Thanks so much for reading!

Jamezon · 23 April 2018 at 11:18AM

Anyone lol?

tim_adam · 23 April 2018 at 11:44AM

lol seriously anyone?

Dazed_and_confused · 23 April 2018 at 6:48PM

I am concerned that a) I have £9k debt in tax, b) this might be pursued by separate parties (SA DCA and via PAYE) and c) this figure is completely unaffordable in HMRC conventional repayment timescales. For example the £4k PAYE debt alone will depress my wage by £400 a month for the next year, putting me well into the red for monthly budget.

From what you have posted you only actually have a £5k "debt". The other £4k isnt really a debt although granted it is reducing your take home pay by about £333 (it shouldn't be reducing it by £400/month).

So personally I would focus on the £5k owed under Self Assessment and be proactive in making an offer to HMRC rather than have them chasing you.

Another thing you can do whilst negotiating is actually making payments which would show goodwill on your part. You know the money needs to be paid so start paying what you can afford even if small amounts. That will also help minimise the interest charges which are no doubt accruing.

Dazed_and_confused · 23 April 2018 at 6:49PM

And also check your current tax code with a fine tooth comb to make sure it is as accurate as possible!

Jamezon · 25 April 2018 at 7:19AM

Thanks guys. I am not disputing the total amount of tax due... The issue is the tax code I am now on has reduced my take home to the point where I am in a monthly deficit. Can barely cover regular outgoings, far less contribute to my SA bill as well. Is there any way they would consider recouping my 17/18 tax over a longer period... Or combine both sums due so I can make a single payment which would be more affordable?

I don't dispute I've had the benefit at some time but moving forward, I feel boxed into a corner... Not entirely sure how I progress it without the spare cash to tackle the issue.

kazwookie · 25 April 2018 at 7:22AM

Get another job to help pay towards the tax bill.

bertiewhite · 25 April 2018 at 8:03AM

Jamezon wrote: »

Anyone lol?

You're "Laughing out loud" about having an unaffordable tax bill?

dori2o · 27 April 2018 at 6:59PM

If you are still in SA they shouldnt really be collecting a potential underpayment for 17/18 through your tax code.

I would Phone and ask for the underpayment restriction to be removed because you are in SA.

Jamezon · 28 April 2018 at 12:27PM

This is partly my problem... They have said 16/17 will be my last SA year but I have a legacy debt AND underpaid tax 17/18.

niktheguru · 1 May 2018 at 4:01PM

Sounds like you need to estimate what your net income is FAST. surely you can work this out without needing your tax code. (at very least work out what your gross income is and then use the tax bands to subtract the necessary tax)

Then, give HMRC a call and negotiate a payment plan. They usually will give you a 3 year interest free payment plan to pay back large sums of tax owed if you explain your situation to them.

As a previous poster has said, if you just wait and do nothing then they'll get debt colleciton involved, and thats when it gets complicated. Just make some small payments if possible. Don't you have any savings? What did you do with all the excess pay you were getting when the tax was incorrectly deducted?

Unaffordable personal tax bill

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