HMRC wont use my new tax code - Racking up a tax bill.

[Rick_1138]

Hi folks,

At new year I received a tax bill for some £700 due to my tax code apparently being incorrect for the benefits we get at work, mainly medical I believe, this was for tax year 2011-2012, however in Feb of this year I got another one for about the same amount for the tax year 2012-2013.

They gave me a new tax code to recoup the £1400 odd due, however I have received this months pay cheque and my code is as it was. Speaking with the accounts manager, she explained that she cannot change the tax code until HMRC tell her to do so when they do PAYE stuff each month, apparently it comes up on the system if anyone's code changes.

I am a bit worried about this as I would rather they took the cash out making me about £100 a month worse off, but at least it would be paid off this year.

Should I be phoning HMRC to ensure they change this as I don't want it to happen again and then be another £700 under taxed.

Seems bloody backwards though, HMRC aren't taking enough, but don't update the system to take it back.

At least they didn't ask for a lump sum!

Any advice on what I should be doing here?

Cheers

[kiethton]

Just leave it be, it'll trickle through in time....longer its in your account the better afterall

[Rick_1138]

Well yes, but I don't want to keep getting £700 tax bills each year then eventually be stuck with say a £5k bill.

[sumo69]

Have you received a new tax code for 2014/15?

If not, then your employer will simply roll forward your old tax code and add 56 to account for the increase in the personal allowance - do if this showed a deduction for tax due on private health you will continue to pay this (although it is an estimate based on an older year).

David

[Du1point8]

Rick_1138 said:

Well yes, but I don't want to keep getting £700 tax bills each year then eventually be stuck with say a £5k bill.

Would the simple answer not be to not spend it and put it in another account and leave it?

You know they are short, you know there will be a bill at the end, if you spend it then you only have yourself to blame.

[skeeterm5]

Give HMRC a call, explain the situation and they should change your code.

S

[jock mcsporran]

skeeterm5 said:

Give HMRC a call, explain the situation and they should change your code.

S

This ^^ I called them to change my code and it was done in my next pay slip.

[Eric Mc]

It is an anomaly in the PAYE system in that the tax you pay through your CURRENT PAYE deductions will usually take into account the value of the Benefits in Kind you actually had in the previous tax year. This is due to the fact that for most BIKs, HMRC only find out about them when the employer supplies the details to them AFTER the tax year has ended (on the Form P11D).

The government announced in the recent budget that they will be overhauling the P11D system at some point as it is increasingly out of step with how PAYE is administered - especially since the introduction of Real Time Information (RTI) for all other aspects of PAYE.

[anonymous-user]

It cetainly used to ne the case that the revenue did not object if you instructed your employer to use a code that resulted in more tax being paid, but an emplyer would not operate a code that reduced tax unless rec;d direct from the revenue.

[oyster]

Rick_1138 said:

Well yes, but I don't want to keep getting £700 tax bills each year then eventually be stuck with say a £5k bill.

I'd happily be landed with a £1m tax bill, if HMRC had been undertaxing me £100k for 10 years.

Surely money in your account is better than in theirs?

[NPI]

Rick_1138 said:

Well yes, but I don't want to keep getting £700 tax bills each year then eventually be stuck with say a £5k bill.

I'm not going say that can't happen, but in your situation it really shouldn't.

You already owe £1400 and hopefully your 14-15 tax code has that in it, plus another £700 for this year. So even at 40% you're underpaying £70mth (not £100).

There's a limit to the amount of underpayment that can be taken out of your tax code - I think it's something like £2500? - hence why I say it shouldn't get to £5000.

Do you do self-assessment every year? I guess there's nothing stopping you from just paying it off if you wanted to.

[Rick_1138]

Hi folks, good advice all, However a funny situation meant it looked like nothing has happened.

It seems my new tax code has been applied, however we got a cost of living increase that worked out to give me exactly the same monthly take home after having my extra tax taken, this caused all kinds of confusion with me and the finance controller until we had all the bits of paper in front of us to see what had happened as we both assumed it wouldn't be exactly the same.

So happy days, She is worse off as she got a 3 year bill to deduct due to medical benefit being taxed incorrectly by HMRC (I was the same).

Scary that it can go a while without HMRC taking what its supposed to, but ah well, happy days.

[NPI]

Eric Mc said:

It is an anomaly in the PAYE system in that the tax you pay through your CURRENT PAYE deductions will usually take into account the value of the Benefits in Kind you actually had in the previous tax year. This is due to the fact that for most BIKs, HMRC only find out about them when the employer supplies the details to them AFTER the tax year has ended (on the Form P11D).

Is HMRC supposed to promptly adjust the coding based on receipt of the P11D?

If relying on self-assessment you'd be going back 2 yrs - ie you get private medical cover in 12/13, you fill in your SA late 13/14 and then it gets included in your tax code for 14/15.

[sumo69]

NPI said:

Is HMRC supposed to promptly adjust the coding based on receipt of the P11D?

If relying on self-assessment you'd be going back 2 yrs - ie you get private medical cover in 12/13, you fill in your SA late 13/14 and then it gets included in your tax code for 14/15.

Yes they are reviewed when P11d's are submitted (I should say processed as there can be delays) and also on submission of a tax return.

David