Self Assessment - Tax shortfall with RSUs

[joetax555]

Posting under a new user to stay anonymous.

For the second year running i've been required to complete a self assessment despite having solely PAYE income from a single employer. I assume this is because it equates to > £100k PA.

Last year I completed the self assessment for the 2017-18 tax year and entered the numbers from my P60 and was required to pay an additional ~£3k of tax. As it was just under the 3k mark, they would adjust my tax code and take it from my pay throughout 18-19, which they have now been doing.

I have just come to file my self assessment return for 2018-19 and I'm now being asked to cough up an additional £5k this time.

Having a single income from a single source, I believe the reasons for these shortfalls are linked to the RSUs I receive. In 2018-19 RSUs that vested and were sold accounted for ~46% of my yearly salary.

The RSUs are from an American company and are held in dollars. They vest at a given date, at which point approx 42% of the RSUs are sold to cover tax and national insurance. These deductions show up up on my pay slips.
I then choose to sell the remaining vested stock when I wish (at which point the value may have increased or decreased slightly from when they vested... (I don't think they have ever increased) and I receive the whole amount.

So my question is essentially: is entering the values from my P60 enough, and should I stop complaining and pay the tax... or is there something I am missing?

I plan on consulting an accountant, but would like some initial feedback. Many thanks.

[sas62]

Is it possible your employer is giving you a tax free allowance while calculating your salary, and the allowance then starts to reduce when you reach 100k earnings to zero at roughly £123k.

As an example they calculate using regular personal allowance of £11,850. Then you earn (say). £110k. (This would include any vested RSU)

At 110k the allowance should be reduced to 6850. (ie 5000 is removed).

So if they have used full allowance of £11850, you'll have underpaid 40% tax on £5000 - ie approx £3000

Apologies if my calculations are a bit of but I'm sure you get the gist.

Edit to add - if you know you're going to earn more than £123k you can always call HMRC at the start of the tax year and ask then to assign you a zero tax allowance code (0T?) . Your employer will then not under-collect tax during the year. And if you do end up earning less than £123k you'll get a tax rebate. I don't believe HMRC will carry this forward to future years so you'd need to call them at the start of each tax year to be sure.

Edited by sas62 on Tuesday 9th July 22:26

[supersport]

I suspect they deducting the wrong amount.

We get 56% deducted to recover maximum tax at 45% + employees + employers national insurance. Any correction is then through pay, i.e depending on which tax bracket you fall into.

[wrencho]

sas62 said:

Edit to add - if you know you're going to earn more than £123k you can always call HMRC at the start of the tax year and ask then to assign you a zero tax allowance code (0T?) . Your employer will then not under-collect tax during the year. And if you do end up earning less than £123k you'll get a tax rebate. I don't believe HMRC will carry this forward to future years so you'd need to call them at the start of each tax year to be sure.

Edited by sas62 on Tuesday 9th July 22:26

Is this as easy as it sounds? I generally avoid dealing with HMRC and just pay the extra tax through self assessment online.

[sas62]

wrencho said:

Is this as easy as it sounds? I generally avoid dealing with HMRC and just pay the extra tax through self assessment online.

Absolute doddle - never took me more than 5 minutes.

[NickCQ]

sas62 said:

wrencho said:

Is this as easy as it sounds? I generally avoid dealing with HMRC and just pay the extra tax through self assessment online.

Absolute doddle - never took me more than 5 minutes.

If HMRC are going to give you a year's interest-free credit on your taxes, why not use it?
You have to do a tax return anyway if you earn >£100k so there's no less hassle.