Employer failed to deduct enough income tax...
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The liability for the tax remains yours. Under PAYE a company should get your income tax deductions correct, assuming you've kept them up to date with your current tax code (and so have kept HMRC up to date in terms of your employment situation and income so they can issue a tax code in the first place).
Mistakes happen, but it might be possible to argue that if a mistake which went unrectified (despite you informing them of the error) resulted in some loss to you - for example an interest penalty, then you should be compensated for this loss. But that's only the interest, not the principal.
So, unless there are penalties on that £1,000, or you're going to have to take out a loan to fund it, I'd suggest you have absolutely no chance whatsoever. Furthermore, as your employment situation was complicated by the fact you worked for yourself for a while, it seems like self assessment has done exactly what it's meant to do, and correctly assessed your overall tax liability. Just because it wasn't collected at the time doesn't mean it still isn't owed, and still needs to be paid.
Sorry that this isn't the answer you want to here.0 -
Think of the £1000 as an interest free business start-up loan from HMRC.0
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Update...
So I phoned HMRC today and spoke to one of their advisers and they looked into it for me and told me where the problem is.
Basically Company 1 applied the full tax free allowance to my salary for the year even though I only worked there for 3 months. As they didn't provide me with a P45 until a few weeks ago I couldn't pass the P45 on to Company 2 so they weren't aware of this and the applied the tax free allowance to my salary there.
Is this normal payroll practice from Company 1, to apply a full years tax free allowance on an employment period of only 3 months? It doesn't seem logical to me?0 -
Thanks for the response.
I doubt I can get this self assessment wrong?! During the 2017-2018 tax year I only had income from 2 jobs and both of those were full time employment on the PAYE payroll so essentially all I have to do is enter the "total income" and "total tax" figures from both my P45s and that's it right?
Both employers used the same tax code (1150L) and at both roles I was in the higher tax bracket.
In terms of figures from the P45...
Company 1 - Total Pay 11,753.02 - Total Tax 1,583.02
Company 2 - Total Pay 53,579.68 - Total Tax 12,260.54
Thanks again,
Dave
Tax paid on earnings for company 1 appear to be correct if I assume that they were paid in month 4, that the tax figure was actually 1583.20 not 1583.02 and that you were not a higher rate tax payer in this employment.
It would appear that employer 2 were probably operating the emergency tax code ( still 1150L but usually shown as X 1 non-cumulative or something similar) which sometimes results in under-taxing, in order to check this I would need details of each month/weeks taxable gross and tax paid, if you want to know exactly what happened.
It is certainly unlikely that the repayment of tax would pass to the employer even if there was some error made by employer 2 they would only be liable if HMRC established that they were basically incompetent running the payroll, just making a mistake would not be enough. The best you can hope for is asking for time to pay.0 -
Is this normal payroll practice from Company 1, to apply a full years tax free allowance on an employment period of only 3 months? It doesn't seem logical to me?
Look, while I understand your frustrations I think you're focusing in the wrong area. It doesn't matter how much blame you wish to place on company 1 they aren't paying you anything and you'll still need to pay this tax. You'd be better spending the time arranging a payment plan with HMRC and developing your new business.
I also don't agree you're worse off, you effectively earned more money than you were entitled to last year so you must have either spent it on something meaningful or saved it.0 -
Update...
So I phoned HMRC today and spoke to one of their advisers and they looked into it for me and told me where the problem is.
Basically Company 1 applied the full tax free allowance to my salary for the year even though I only worked there for 3 months. As they didn't provide me with a P45 until a few weeks ago I couldn't pass the P45 on to Company 2 so they weren't aware of this and the applied the tax free allowance to my salary there.
Is this normal payroll practice from Company 1, to apply a full years tax free allowance on an employment period of only 3 months? It doesn't seem logical to me?
Somebody's got to apply it at some time, so absent the ability to predict the future, it makes sense for the employer who's employing you at the beginning of the tax year to do it. Why Company 2 also applied it I don't know, but maybe the lack of a P45 explains it. Or maybe they simply made a mistake.
It doesn't alter the fact that you're still liable for the tax though.0 -
I would have thought logically that it would be applied pro-rata?
Eg. 11500 tax free allowance for 12 months means 3 months at Company 1 is 2875 should be applied for the 3 months and then the remaining 9 months at Company 2 get the 8625.
That just seems the most logical to me.ReadingTim wrote: »Somebody's got to apply it at some time, so absent the ability to predict the future, it makes sense for the employer who's employing you at the beginning of the tax year to do it. Why Company 2 also applied it I don't know, but maybe the lack of a P45 explains it. Or maybe they simply made a mistake.
It doesn't alter the fact that you're still liable for the tax though.0 -
The reason you get issued with payslips is for you to check the correct tax etc has been deducted. That is YOUR responsibility.
Usually if you are still employed, HMRC would issue a new tax code for this tax year and take the shortfall from PAYE in this tax year. However, as you are now self employed, that is not possible.
If your payslips had the correct tax taken and it had not been paid to HMRC, then you may well have a reason to put the blame on Company 1. Ultimately, blaming others though will get you no where. You need to pay the tax back, so you need to talk to HMRC.0 -
I would have thought logically that it would be applied pro-rata?
Eg. 11500 tax free allowance for 12 months means 3 months at Company 1 is 2875 should be applied for the 3 months and then the remaining 9 months at Company 2 get the 8625.
That just seems the most logical to me.
Pro-rating would only make sense if company 1 knew, in advance, that you would both be leaving its employment AND taking up employment with someone else for the remainder of the tax year.
Even if it knew you were leaving (ie end of FTC), it couldn't possibly know what your future plans and job prospects were (ie how long it might take you to find another job).
Your logic is flawed and you still owe HMRC a grand. Suggest you spend your time and energies working out how you're going to pay than, rather than endlessly arguing here.0 -
As both myself and chrisbur have pointed out company 1 deducted the correct tax on earnings to date for a final pay date after July 6th. The failure to get a P45 passed to company 2 seems to be the cause of the problem, a P45 is pretty much essential when changing employers. It could be argued it is the taxpayer's responsibility to ensure this is done so that their PAYE can be managed correctly. Without a complete breakdown of each pay slip it is hard to figure out exactly where it went wrong.0
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