Tax underpaid despite PAYE...

[classicvanquish]

Hi there,

Not sure if someone can give me a little advice.

I have been requested to do a tax self assessment and it looks like I have underpaid tax to the tune of almost £4,600 for the period March 20 to March 21. The HMRC say this needs to be paid by end of Jan 22, which is an awesome Christmas present.

I have no secondary income from anywhere and am just a normal employee who is paid monthly and taxed via PAYE.

My question is does my employer have any liability towards this amount? I have done some googling and the answers seem divided, with some saying it's my responsibility to pay and others saying it's the employers mistake so it's their responsibility.

Thanks in advance.

Simon

[itcaptainslow]

If you’ve earned over £100k, for every £2 over £100k, your personal allowance is reduced by £1 (essentially a 50% tax bracket). However, the daft PAYE system can’t take this into account, so it’ll require a self assessment and then subsequent adjustment of your tax code for the following tax year to recoup the underpaid tax.

If the underpaid tax is over (from memory) £3k, then it can’t be collected via an adjustment and the PAYE system, so you’ll have a delightful present.

Edited by itcaptainslow on Saturday 4th December 16:28

[randlemarcus]

Sadly, you alone are responsible for your tax being correct, despite digital tax etc.

That said, they won't chase you hard for it, if you ignore penalties etc.

[Countdown]

classicvanquish said:

Hi there,

Not sure if someone can give me a little advice.

I have been requested to do a tax self assessment and it looks like I have underpaid tax to the tune of almost £4,600 for the period March 20 to March 21. The HMRC say this needs to be paid by end of Jan 22, which is an awesome Christmas present.

I have no secondary income from anywhere and am just a normal employee who is paid monthly and taxed via PAYE.

My question is does my employer have any liability towards this amount? I have done some googling and the answers seem divided, with some saying it's my responsibility to pay and others saying it's the employers mistake so it's their responsibility.

Thanks in advance.

Simon

Do you know WHY you have underpaid? Did your employer use the wrong tax code?

Tbh even if it's the Employers mistake I can't see them paying but the starting point would be to ascertain who (if anybody) was at fault.

[classicvanquish]

Thanks for all the replies.

I have had nothing to do with tax codes etc and assumed (incorrectly) my employer was taxing me correctly.

I have a meeting with the FD Monday to find out what's gone on and I'm sure I can drag repaying it out but pretty unhappy with the situation as I'm sure you can understand!

[Countdown]

classicvanquish said:

Thanks for all the replies.

I have had nothing to do with tax codes etc and assumed (incorrectly) my employer was taxing me correctly.

I have a meeting with the FD Monday to find out what's gone on and I'm sure I can drag repaying it out but pretty unhappy with the situation as I'm sure you can understand!

The only effect the Employer has on PAYE tax is ensuring that the correct tax code is applied and HMRC tell them which tax code to apply via P6/P9 downloads. As long as your Payroll team have followed the correct process the Employer can't really be held to blame.

However IF the employer hasn't applied the correct tax codes then effectively you#ve been overpaid so it's still technically you that owes the money, and also you that HMRC will chase. In these circumstances it might be worthwhile asking the Employer for a tax free loan so that you can repay over a longer period.

[Sheepshanks]

classicvanquish said:

I have had nothing to do with tax codes etc and assumed (incorrectly) my employer was taxing me correctly.

Just out of interest, what kind of job do you do?


You could get your own back on HMRC and whack a load of money into your pension, assuming you've got unused allowance from 20-21 (or even in the prior two years).

[anonymous-user]

Your employer can be liable if he fails to defuct paye timely or if he fails to correctly action a paye code. If the paye code is wrong thats your problem.

[Wills2]

itcaptainslow said:

If you’ve earned over £100k, for every £2 over £100k, your personal allowance is reduced by £1 (essentially a 50% tax bracket). However, the daft PAYE system can’t take this into account, so it’ll require a self assessment and then subsequent adjustment of your tax code for the following tax year to recoup the underpaid tax.

If the underpaid tax is over (from memory) £3k, then it can’t be collected via an adjustment and the PAYE system, so you’ll have a delightful present.

Edited by itcaptainslow on Saturday 4th December 16:28

My experience is HMRC do forecast or "run rate" your earnings and will adjust your tax free allowance via PAYE coding if they think you're going to earn over 100k, they have done this to me this year.

[djc206]

itcaptainslow said:

If you’ve earned over £100k, for every £2 over £100k, your personal allowance is reduced by £1 (essentially a 50% tax bracket). However, the daft PAYE system can’t take this into account, so it’ll require a self assessment and then subsequent adjustment of your tax code for the following tax year to recoup the underpaid tax.

If the underpaid tax is over (from memory) £3k, then it can’t be collected via an adjustment and the PAYE system, so you’ll have a delightful present.

Edited by itcaptainslow on Saturday 4th December 16:28

60% tax bracket, plus NI.

[Chris Type R]

Sheepshanks said:

You could get your own back on HMRC and whack a load of money into your pension, assuming you've got unused allowance from 20-21 (or even in the prior two years).

This is the route I'd try and go if the cash and allowance was available.

[NickCQ]

classicvanquish said:

My question is does my employer have any liability towards this amount? I have done some googling and the answers seem divided, with some saying it's my responsibility to pay and others saying it's the employers mistake so it's their responsibility.

Why on earth would it be your employer's responsibility? HMRC's money has been paid to you.

[Wilmslowboy]

Clawback for child benefit ?

[cavey76]

At the OP - I have been in sales roles for the last 10 years, last week 6/7 making really good money. In my previous employer i was paid "comp", a variable amount based on what i had sold the previous month, ie a big deal, the following month a big comp payment...conversely a crappy month, no sales then no comp or variable the following month.

Hence why in certain professions it can be difficult for HMRC to judge where your tax should be. I have had the same surprises, as another poster commented it all balances out and i don't get to aggrieved by a bill or ecstatic at a rebate.

If you are over £100K this is likely the cause.

if over 60K but under a 100K its likely a consequence of the Child Benefit clawback,

[AyBee]

Unlikely they'll help you out unless they're very generous, and why should they? I assume you're pushing over the £100k figure? Do you work in a bonus/commission role? Can you not afford to repay it, or are you just wanting someone else to pick up the expense since you've already spent the money that should have gone towards tax?

[Jefferson Steelflex]

There’s an onus on the individual, tax codes aren’t that complicated and you can roughly see how accurate your one is from just a simple cursory look at the tables published by HMRC.

When i went over the magic number and ended up losing my allowance, i informed HMRC in advance so they put my code down - I even told them about benefits i was receiving (healthcare, etc.) so i was given a K Code. In the past few years i’ve had tax refunds every year, only a few £00 but still a nice gift.

Like a previous poster i work in sales so my salary fluctuates massively month over month, but you have to remember tax is annualised, so as long as you have a rough idea what you’ll be earning then you can do it all in advance a d HMRC won’t keep adjusting it.

[classicvanquish]

Thanks for all the replies!

I had a meeting with the FD and they say they just use the code given to them by HMRC, as you guys have said of course.

I haven't spoken to HMRC yet as not had chance but reading your replies it seems an increase in basic pay (I have a standard salary, not variable such as some of you in sales) has caused them to give me the wrong tax code.

It was a shock to me as I obviously don't try and hide anything and made a clearly naive assumption that between my employer and HMRC they would tax me correctly.

Of course I'll pay the bill if that's what I owe but I'm sure you can imagine it took me by surprise.

Thanks again

[mudd1e]

Once you have all the details and know the exact final figure, Ask HMRC if you can pay it back across the next Tax year - They should be able to set your tax code up so that you repay the owed amount over a longer period

[Wills2]

Just register on the gov.tax portal and you can see it all on there, make relief claims, change your forecasted earnings etc...you've underpaid at a rate of nearly £400 per month most people would notice that increase, so I'd register online so you can get a better handle on your tax liabilities.

[Eric Mc]

That is the way HMRC wants all taxpayers to manage their tax affairs. The problem is that they are not communicating this in any reasonable way. There should be a national advertising campaign to let people know about their Digital Tax Account and how to manage it.

It's almost as if HMRC does NOT want to inform taxpayers of their rights and responsibilities under UK tax law.