Tax - Personal Allowance query

[thekingisdead]

I submitted my Self assessment return in December 19, and since then, HMRC wrote to say my Personal allowance would increase for the remainder of the 19/20 tax year to claw back a rebate from SIPP & charity donations. So far so good.

For 20/21 tax year I owe HMRC a small amount and I've elected for it to be re-claimed through PAYE, so my personal allowance is being reduced to account for this.

Can anyone clarify why my *increased* personal allowance from 19/20 has stayed in place for 20/21?

I would have assumed money I was owed by HMRC would be re-claimed by the end of the tax year and therefore for the new tax year my personal allowance would reset to "normal" (12500L) before having any new additions or subtractions.

Based on the letter they have sent me they are carrying over additions into a new tax year - which by my understanding would mean I would start paying too little tax?

Are any accountants able to clarify? Do they assume SIPP / Charity contributions will continue at the current level?

I'm going to ring HMRC to discuss but thought I'd try and arm myself with a little more info first.

[bmwmike]

IME hmrc are a pain in the hole when it comes to tax codes. I made a sipp payment in FY18-19 and for current tax year they assumed I'd make the same payment so increased my allowance accordingly. I'd prefer they just left it as is and adjust at end of year. In your case I'd say yes they've made some assumptions on your behalf that those contributions will continue.


I'm so tempted to go contracting as ltd and gain complete control over tax. Paye feels like a mugs game.

[mfmman]

As Mike says above, if you tell HMRC about a situation on one year they will assume it will apply in all years.

I had a situation of still being paid for one role for three months after I had started a new one. Both companies (despite my best efforts) paid me as if I only had a single job.

Resolved via self assessment and paid the bill as soon as it came in (£5k). HMRC then included this situation in my tax code for the following year as well. Even when I called them up they really didn't want to remove it and only did when I insisted. I pointed out I wasn't expecting a second income in this tax year and they told me that if I did have additional income from any source I would be fined for late payment of tax. Charming!

[jonwm]

I find the changing of tax codes a right pain, after every SA they seem to assume i will make the exact same charity donation next year and amend my code accordingly, I wish they would just wait till my SA.

[thekingisdead]

Thanks everyone - that’s what I thought - HMRC has assumed I’d continue with the same level of SIPP / charity contributions.

I’m taking time off next year so probably won’t be a higher rate tax payer. I will ring them and ask them to amend it. Would rather not have a big bill come the end of the tax year.

Thanks

[Eric Mc]

Phone them up and tell them the situation and they will adjust the tax code back to a more reasonable position.

They have plans to abolish Self Assessment altogether - so this is the way they want to run things in the future.