Income Tax question

[Gucci]

Having recently returned my Self Assessment form for the year 2005/2006, I have received a notice from HMRC regarding tax owed and their intention to change my code for the year 2007/2008.

Can someone confirm what tax should I should have paid for 2005/2006 based on a tax code of 489L.

Salary £11713.00 - Tax paid PAYE £1248.00
Dividend £26250.00 - Tax Credit 10% £2916.67
Dividend from Trust - £5250.00

[Eric Mc]

I'll do it for a fee.

[arfur]

I think that by default the SA return ticks the box "collect anything I owe through my tax code". So if you owe anything ( payments on account per chance ? ) then that is why they change it ...

Ring them up and they'll change it back

[Eric Mc]

It is more complicated than this.

Your tax return is for the year 2005/06.

If the return shows a liability, they will automatically want to collect underpaid amounts for 2005/06 through your 2006/07 tax code. If the return is sent in after 30 September, they will run the adjustment through the 2007/08 tax code.

What's more, they may decide to "predict" your Self Assessment tax liability for 2006/07 by assuming it will be the same as for 2005/06 AND try to collect this predicted amount IN ADVANCE by adjusting your 2006/07 OR your 2007/08 tax codes.

As you can see, your tax coding can become extremely complicated as the Revenue try to collect both "arrears" and "in advance" tax liabilities through the the same year's codes.

You can instruct the Revenue NOT to collect the Self Assessment tax liabilities this way but the onus is on YOU to notify them.