First HMRC SA - PAYE but owe £3k?

[MarkGArgyle]

Hi,

Have just completed the SA for the first time since moving back to the UK. Needing to do this due to salary being over the £100k threshold but being PAYE with no other income or receiving any child benfit payments I wasn't concerned and thought it would be a 5min job.

Used my P60 & P11D to input and due to having BIK on medical cover at @ £2k it seems I now owe over £3k in tax which will be taken next year? How does that work when my employer calculates everything monthly with any adjustments being made via my tax code?

I didn't submit it yet and may ignore it for now and take the risk of the fine (HMRC didn't actually tell me to do it yet but presumed I did).

Am I missing something here?

Thanks in advance,

Mark G

[deggles]

Not sure how you can owe £3k of tax on £2k of benefit. Unless there's a payment on account for next year?

[V12GT]

Afraid that the onus is on you to report your income to HMRC and pay any tax that you owe.

So my recommendation is to try to understand from the SA why you owe £3k (was it from interest, dividends or just underpaying PAYE) and ensure that their calculation is right, but if so, pay the money by midnight tomorrow.

If you don't, they will fine you £100 plus charge you interest on the £3000 owed.

My best guess without knowing your circumstances is that your Personal Allowance starts to reduce when you get to £100k and your company may not have factored this in if part of your income was from a bonus? That reduction in PA is at an effective tax rate of 60%, so it doesn't take much to owe an extra £3k.

ETA - you say you have no other income, so probably just underpaying PAYE

Edited by V12GT on Monday 30th January 16:28

[essayer]

if your tax code is still 1257L it's probably the income over £100k for which you lose personal allowance

[MarkGArgyle]

V12GT said:

Afraid that the onus is on you to report your income to HMRC and pay any tax that you owe.

So my recommendation is to try to understand from the SA why you owe £3k (was it from interest, dividends or just underpaying PAYE) and ensure that their calculation is right, but if so, pay the money by midnight tomorrow.

If you don't, they will fine you £100 plus charge you interest on the £3000 owed.

My best guess without knowing your circumstances is that your Personal Allowance starts to reduce when you get to £100k and your company may not have factored this in if part of your income was from a bonus? That reduction in PA is at an effective tax rate of 60%, so it doesn't take much to owe an extra £3k.

ETA - you say you have no other income, so probably just underpaying PAYE

Edited by V12GT on Monday 30th January 16:28

Thanks - worryingly it sounds like this. My bonus is 40% before tax and so £25k or so could well be the contributor. I'll try and work it out. I foolishly believed a public-listed company could work out PAYE...thanks.

[MarkGArgyle]

essayer said:

if your tax code is still 1257L it's probably the income over £100k for which you lose personal allowance

During the 21/22 tax year it was C627T, it was C822T when I changed role within the business in July 2022 and now is sitting at C750T w1m1.

I really should pay more attention than just trusting PAYE to get it right...

[Panamax]

To answer your question, yes, HMRC will probably award you a new tax code trying to do two things,

• Tax you automatically to about the same level next year, and
• Recover the £3k that you already owe.

Presumably when you filled in your SA this must be what you told them to do. Otherwise you could have been billed £3k now instead.

The coding process is a never-ending lottery - unless you have one steady employment with pretty stable salary etc.

The way they code me is a joke but I've given up fretting about it. It all comes out in the wash and I just pay off any additional tax immediately if and when assessed. Makes it easier to understand the following year....

[Timbo_S2]

If it helps, i'm in almost exactly the same situation, and having filled today,. find I owe about a similar amount...

[Sheepshanks]

MarkGArgyle said:

I foolishly believed a public-listed company could work out PAYE...thanks.

They can only act on the tax code HMRC send them.

They (HMRC) never allow for my private medical - they know the number and now and again it appears in coding notices, but then disappears again. As it was £10K last year it leaves me well light on tax.

As other have mentioned, I think it also can't cope when you breach £100K.

[onetwothreefour]

Panamax said:

To answer your question, yes, HMRC will probably award you a new tax code trying to do two things,

* Recover the £3k that you already owe.

.

Too late for that - if you want HMRC to recover underpaid tax from next year's PAYE (i.e. 23/24 now), you had to have done SA and requested this by 31 December.

[V12GT]

MarkGArgyle said:

Thanks - worryingly it sounds like this. My bonus is 40% before tax and so £25k or so could well be the contributor. I'll try and work it out. I foolishly believed a public-listed company could work out PAYE...thanks.

Never trust your company or HMRC to get it completely right! In fairness, the tax code has become so complex over the past 20 years that it's pretty difficult to keep up to date, which is why they ask for a SA after the year end to catch any unpaid tax / repayments due.

In a glass half full kind of way, you've had a £3k interest free loan since the end of the last tax year in April 2022!

[mikef]

If it’s over £3K you usually have to pay by 31 Jan, HMRC page says they only adjust your code if it’s under that amount owing

https://www.gov.uk/pay-self-assessment-tax-bill/th....

I just had to fork out a bit over £3K when I know I’ll be due twice that back in April, having retired in September

[otolith]

I queried this with our accountant - the issue with the reduction in personal allowance creates this issue all the time.

[The Leaper]

Surely, one message here is don't leave completion and filing of your SA until the last day or two before a deadline, especially with HMRC changing fines automatically

R.

[Uncle boshy]

It will be down to losing the allowance over £100k.

Your employer will only tax you based on the tax code it has. Hrmc take an average view, so first time through don’t know your going to hit the 60% rate.

Tbh, even when you’ve been in that bracket a few times they don’t get it right, so best thing for next year is to keep a bit of your bonus back in a savings account to cover the extra tax.

Also check your code next year as I’ve also had it where they whack up the tax code assuming the bonus is your new regular monthly salary.

[Armitage.Shanks]

I've always seemed to have underpaid and it gets collected the following year by adjusting my tax code unless they've done that during the year. And indeed they have, several times so I end up with my pension payments reducing

[MaxFromage]

Not much to add, but you may find HMRC never get this right unless you call and get your tax code changed. If you earn different amounts each year between £100K and £125K, HMRC can't help you get it exactly right.

Did you work from home? If so don't forget the working from home allowance. No personal pension contributions? If you can afford them, you could get 60% tax relief if you earn sub £125K. No other minor expenses? Motor expenses not claimed, subscriptions etc?

[MarkGArgyle]

Thanks all for detailed and helpful replies, can always rely on PH.

Yes, will do prior to year end next time, but as said this was a first time since coming back to Blighty and thought it would be the proverbial walk in the park. Lesson learned.

Will look into the WFH allowance as I am fully home based and didn’t see that on the SA, no car claiming as have an allowance, have some minor fuel claims but that is it as the car uses as much fuel as I can claim so mainly use a taxi for the airport.

Total amount slightly above the <£125k bracket but first world problems I know.

Thanks again and will keep a few k back for next year (whilst watching my tax code)…

[supersport]

MarkGArgyle said:

essayer said:

if your tax code is still 1257L it's probably the income over £100k for which you lose personal allowance

During the 21/22 tax year it was C627T, it was C822T when I changed role within the business in July 2022 and now is sitting at C750T w1m1.

I really should pay more attention than just trusting PAYE to get it right...

Seems odd that your tax allowance goes up when you pay goes up and are now in the loosing personal allowance zone.

Also seems you are on an emergency code?

As a first point of call I always make sure that hmrc know what my expected income is for the year. It should make sure you are on the right code,,

[Kirkmoly]

MarkGArgyle said:

Thanks again and will keep a few k back for next year (whilst watching my tax code)…

Best to not get too hung up on the tax code. It’ll rarely be correct. All that matters is what was withheld vs what you owe in tax.

This April you’ll get a P60 for the 22/23 tax year so you will know your full year pay and tax withheld. Add on your BIK and plug the numbers into one of many on-line tax calculators and you will know with certainty what the true-up will be when you file SA in December.

You don’t want to use SA to figure out your tax bill. That should be known in advance with SA used to complete the filing formalities and pay up or get your refund.