aaarrrgghhh Tax
Discussion
So I filled a self assessment form in a month or so ago, I am on PAYE but have a property that rents. Last year due to one or two things, I made less than a grand of net income from the flat.
I really didn't expect the return to throw up any issues, but this week I get 2 letter from the revenue, one saying I owe them another £2.5k, and then another altering the current years tax code effectively giving me a larger personal allowance (to allow for professional registration fees that I pay every year).
I am perplexed that my PAYE has not covered my tax bill, and that next year I will be paying slightly less tax - these two facts seem mutually exclusive to me.
Today I have a day off, it looks like I am going to spend that day looking at tax issues and/or sitting on the help line!
I really didn't expect the return to throw up any issues, but this week I get 2 letter from the revenue, one saying I owe them another £2.5k, and then another altering the current years tax code effectively giving me a larger personal allowance (to allow for professional registration fees that I pay every year).
I am perplexed that my PAYE has not covered my tax bill, and that next year I will be paying slightly less tax - these two facts seem mutually exclusive to me.
Today I have a day off, it looks like I am going to spend that day looking at tax issues and/or sitting on the help line!
Use an accountant - end of story.
You should not be paying £2,500 on £1,000 rental profits (it should be only £200)
With a self assessment tax liability yiou would not be expected to make Payments on Account for 2011/12 *the liability would have to exceed £2,000)
Was your PAYE handled correctly for 2010/11?
Did you have a standard tax code for 2010/11 (647L)?
You should not be paying £2,500 on £1,000 rental profits (it should be only £200)
With a self assessment tax liability yiou would not be expected to make Payments on Account for 2011/12 *the liability would have to exceed £2,000)
Was your PAYE handled correctly for 2010/11?
Did you have a standard tax code for 2010/11 (647L)?
Edited by Eric Mc on Tuesday 8th November 08:07
Thanks guys.
This is the return for 2010-11.
The payment due is a single payment 31st jan
I do the self assessment to capture the rental income from property. So I was expecting to need to cough a little for this. but as my net income was pretty low this year (checked details, actually just under 500 quid!) I wasn't expecting 2.5k.
I had no outstanding tax as I paid up for the previous years at the time.
I am assuming that my PAYE hasn't collected enough tax, or that there is an error somewhere, creating the appearance of a 25% deficit
This is the return for 2010-11.
The payment due is a single payment 31st jan
I do the self assessment to capture the rental income from property. So I was expecting to need to cough a little for this. but as my net income was pretty low this year (checked details, actually just under 500 quid!) I wasn't expecting 2.5k.
I had no outstanding tax as I paid up for the previous years at the time.
I am assuming that my PAYE hasn't collected enough tax, or that there is an error somewhere, creating the appearance of a 25% deficit
sawman said:
Thanks guys.
This is the return for 2010-11.
The payment due is a single payment 31st jan
I do the self assessment to capture the rental income from property. So I was expecting to need to cough a little for this. but as my net income was pretty low this year (checked details, actually just under 500 quid!) I wasn't expecting 2.5k.
I had no outstanding tax as I paid up for the previous years at the time.
I am assuming that my PAYE hasn't collected enough tax, or that there is an error somewhere, creating the appearance of a 25% deficit
The payment on 31 January is always a single payment. However, sometimes it is made up of two components - the balance due for the previous tax year and the first payment on account due for the next tax year. In other words, the payment due on 31 January could be a combination of the balance due for 2010/11 plus the 1st Payment on Account for 2011/12.This is the return for 2010-11.
The payment due is a single payment 31st jan
I do the self assessment to capture the rental income from property. So I was expecting to need to cough a little for this. but as my net income was pretty low this year (checked details, actually just under 500 quid!) I wasn't expecting 2.5k.
I had no outstanding tax as I paid up for the previous years at the time.
I am assuming that my PAYE hasn't collected enough tax, or that there is an error somewhere, creating the appearance of a 25% deficit
My hunch that this is not the case for you as the only Self Assessment Element of your tax liability should be the amount due on your Rental Profits - which you tell us only came to £1,000. Therefore, as I have already said, the tax liability arising on those rental profits would only be £200, which is too low to trigger a Payment on Account for 2011/12.
It does indeed look like you have a PAYE problem.
Look at your PAYE situation for 2010/11. The P60 is the key.
What was your gross salary for the year per the P60?
What was the PAYE tax deducted on your salary as per the P60?
Waht was the tax code showing on the P60?
Was it 647L or something else?
If something else, what was that "something else" and why was it NOT 647L?
Did you receive any taxable benefits in kind from your employer in 2010/11?
If so, did you receive a P11D from your emoployer?
If you did, did you enter the P11D details correctly on the self assessment tax return?
Eric Mc said:
The payment on 31 January is always a single payment. However, sometimes it is made up of two components - the balance due for the previous tax year and the first payment on account due for the next tax year. In other words, the payment due on 31 January could be a combination of the balance due for 2010/11 plus the 1st Payment on Account for 2011/12.
My hunch that this is not the case for you as the only Self Assessment Element of your tax liability should be the amount due on your Rental Profits - which you tell us only came to £1,000. Therefore, as I have already said, the tax liability arising on those rental profits would only be £200, which is too low to trigger a Payment on Account for 2011/12.
It does indeed look like you have a PAYE problem.
Look at your PAYE situation for 2010/11. The P60 is the key.
What was your gross salary for the year per the P60?
What was the PAYE tax deducted on your salary as per the P60?
Waht was the tax code showing on the P60?
Was it 647L or something else?
If something else, what was that "something else" and why was it NOT 647L?
Did you receive any taxable benefits in kind from your employer in 2010/11?
If so, did you receive a P11D from your emoployer?
If you did, did you enter the P11D details correctly on the self assessment tax return?
Cheers Eric, My hunch that this is not the case for you as the only Self Assessment Element of your tax liability should be the amount due on your Rental Profits - which you tell us only came to £1,000. Therefore, as I have already said, the tax liability arising on those rental profits would only be £200, which is too low to trigger a Payment on Account for 2011/12.
It does indeed look like you have a PAYE problem.
Look at your PAYE situation for 2010/11. The P60 is the key.
What was your gross salary for the year per the P60?
What was the PAYE tax deducted on your salary as per the P60?
Waht was the tax code showing on the P60?
Was it 647L or something else?
If something else, what was that "something else" and why was it NOT 647L?
Did you receive any taxable benefits in kind from your employer in 2010/11?
If so, did you receive a P11D from your emoployer?
If you did, did you enter the P11D details correctly on the self assessment tax return?
To complicate things slightly, in the year we are talking about I had 2 part time jobs (concurrently) both of these finished during the year and at the beginning of march I started 2 new part time posts.
I'm in the process of sifting through all my payslips and P60's before I get back to the tax office
I'll be back later if I learn anything
Bingo.
I would hazard a guess that you were allocated two lots of personal tax allowances, one for each employment. You are only entitled to one tax allowance in any given tax year.
The tax allowance for 2010/11 was £6,475
£6,475 at 20% equates to £1,295 underpaid tax.
Check the P60s from BOTH employments and see what codes were showing on BOTH P60s.
I would hazard a guess that you were allocated two lots of personal tax allowances, one for each employment. You are only entitled to one tax allowance in any given tax year.
The tax allowance for 2010/11 was £6,475
£6,475 at 20% equates to £1,295 underpaid tax.
Check the P60s from BOTH employments and see what codes were showing on BOTH P60s.
Eric Mc said:
Bingo.
I would hazard a guess that you were allocated two lots of personal tax allowances, one for each employment. You are only entitled to one tax allowance in any given tax year.
The tax allowance for 2010/11 was £6,475
£6,475 at 20% equates to £1,295 underpaid tax.
Check the P60s from BOTH employments and see what codes were showing on BOTH P60s.
Ok, I'm getting closer! I would hazard a guess that you were allocated two lots of personal tax allowances, one for each employment. You are only entitled to one tax allowance in any given tax year.
The tax allowance for 2010/11 was £6,475
£6,475 at 20% equates to £1,295 underpaid tax.
Check the P60s from BOTH employments and see what codes were showing on BOTH P60s.
for the year my main job (for 11 months of the year) paid me just over 28k, I paid just under 4.5k tax (code 634L)
my other job (for 9 months) paid just over 20k, I paid 4k tax (code BR)
my 2 new jobs for the last month of the year used the same tax codes and the same rate of pay.
Could it be that I have underpaid over the year on the 2nd job as it looks like I paid basic 20% when I should have paid some at 40%??
sawman said:
Eric Mc said:
Bingo.
I would hazard a guess that you were allocated two lots of personal tax allowances, one for each employment. You are only entitled to one tax allowance in any given tax year.
The tax allowance for 2010/11 was £6,475
£6,475 at 20% equates to £1,295 underpaid tax.
Check the P60s from BOTH employments and see what codes were showing on BOTH P60s.
Ok, I'm getting closer! I would hazard a guess that you were allocated two lots of personal tax allowances, one for each employment. You are only entitled to one tax allowance in any given tax year.
The tax allowance for 2010/11 was £6,475
£6,475 at 20% equates to £1,295 underpaid tax.
Check the P60s from BOTH employments and see what codes were showing on BOTH P60s.
for the year my main job (for 11 months of the year) paid me just over 28k, I paid just under 4.5k tax (code 634L)
my other job (for 9 months) paid just over 20k, I paid 4k tax (code BR)
my 2 new jobs for the last month of the year used the same tax codes and the same rate of pay.
Could it be that I have underpaid over the year on the 2nd job as it looks like I paid basic 20% when I should have paid some at 40%??
I will offer general advice but I cant really justify spending time effectively recomputing your tax for 2010/11.
Obviously, if you want to use the services of an accountant, you can always pm me
For the record, £6,475 at 40% comes to £2,590. So, if you were allocated two personal allowances of £6,475 and you were a higher rate tax payer for 2010/11, you could find that you owed £2,590 in underpaid tax.
PAYE struggles to keep up with people who have more than one source of PAYE taxed income in any one tax year. The system was designed back in 1944 to work for people who had one PAYE job in any one year and, what's more, didn't change jobs often.
It is really struggling to cope with modern employment patterns.
It is really struggling to cope with modern employment patterns.
the lady at the helpline suggested that the problem was my main employer for the year using a 634l code, and then my current (main) employer using the same code for the final month of the year is a problem......
Both of my 2nd jobs are on BR
They are investigating and are going to get back to me!
Both of my 2nd jobs are on BR
They are investigating and are going to get back to me!
sawman said:
Eric Mc said:
634L code at 40% gives you £2,538 underpaid tax.
Thats over the year right - my new job using the same tax code was only for the last month of the tax yearThe only way to work out what has happened is to add up all your gross income for the year 2010/11 i.e.
add together all your gross salaries from all sources per the P60s issued to you by your employers
add in any taxable benefits in kind from your employer(s)(per the P11Ds)
add onto that the net taxable profits from your rents (from your own rental income and expenditure account)
add in any additional interest income from savings and deposits
add in any dividend income
add all the above together to give you your total gross income for 2010/11
deduct you standard personal tax allowance from your total gross income
Calculate your overall tax liability using the tax bands aprropriate to your income level
this will give you an overall tax liability for tax year 2010/11
Deduct from this total liability any PAYE that was deducted at source on your salaries but make sure you DO NOT deduct any PAYE that may have been included in tax year 2010/11 but which related to any previous tax years. This may not be applicable in your case.
Deduct also any tax paid at source on interest received or dividends received
What is left over should be the amount you have to pay under the Self Assessment system and this would normally be payable on 31 January 2012.
Vixpy1 said:
The chances of HMRC sending you a tax demand thats correct are the same as .. Finding an orange cow.
Get an accountant. Preferably one prepared to sail as close to the wind as you are. HMRC aren't going to send you the correct bill, and if you overpay they don't care. It's an absolute bugger to get it back.Proper advice from Eric, though.
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