/ First time Self Assessment woes

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Bjartur i Sumarhus on 08 Jan 2013
So after many years of being "off radar" as a PAYE person I got the dreaded letter through the post earlier last year.

So I filled it out online and because I am a very simple case (one income, no second homes etc) it was relatively simple.

Then at the end it tells me I owe £3k! FCK, why's that? So I call them up, 30 mins on hold..eventually it seems my tax code is wrong. How can that be? HMRC provide it to my employer. So I tell them my new tax code for this year (2012/13) and they say that is wrong as well!

I am now speaking to payroll at my firm to try and understand how this system works and how my tax code could be consistently wrong for the last two years.

Now, I don't expect to be able to wiggle out of this, but has anyone had similar experience and do they have any advice?

cheers
GoC
TheDrunkenBakers - on 08 Jan 2013
In reply to Game of Conkers: Ive been here twice.

As a company car driver I have been hit by the fact that my company has not advised the revenue that i have changed my car and in one year they didnt advise the revenue that i had a car at all. £ks to pay the following year.

You have two options, pay it in one or have it spread across the next financial year. Im not sure if you can spread the underpayment over more than one year.
Neil Williams - on 08 Jan 2013
In reply to Game of Conkers:

Why, if you have one income, have you ended up with a tax return? You shouldn't need one.

Was it a random check, or did they suspect something was wrong and want evidence to correct it? Do you for instance have large savings?

Neil
In reply to Game of Conkers: Yes, through mid year salary changes - it has compounded so each of the last three years I'd done overpayments but the tax was still wrong so the next year has overpayment requirements too. Got it again this year. Doh!
Bjartur i Sumarhus on 08 Jan 2013
In reply to Neil Williams: I have no idea why I was sent a self assessment. Maybe this is a new policy to claw more tax who knows?

It's just galling because through no fault of my own I suddenly have to hand £3k over. And it seems all throughout 2012 my tax code was wrong. So will expect the same next year (although at least it wont come as a shock)
Neil Williams - on 08 Jan 2013
In reply to Game of Conkers:

Do you have a single income, the full tax allowance, little or no savings, no company car etc?

If so this is completely bizarre.

FWIW the basic allowance is £8105 in 2012 which, if your circumstances are simple, most probably makes your tax code 810L for this year. If it's anything other than that and there's not something you've forgotten, that does sound odd. If it is that, I would check carefully on what basis there's a problem.

Neil
Neil Williams - on 08 Jan 2013
In reply to Neil Williams:

(Unless you earn over £100K, in which case you lose the allowance, I believe).

Neil
craig1983 - on 08 Jan 2013
In reply to Game of Conkers:

HMRC always balls up my Tax Code.... and they never seem to learn.

From the sounds of your circumstances, if you're a normal employee of a company...on a 'normal salary'...paid through PAYE...then you shouldn't have to be doing your own tax return.

Before you filled it out online...you should have called them up to ask why you need to do it.
Bjartur i Sumarhus on 08 Jan 2013
In reply to Neil Williams: yes I fall into that bracket. It turns out my tax code for the last three years have been (in order) 587L 2010/11 - 606T 2011/12 - 438T 2012/13.

Payroll told me that they send the n rated p60 to HMRC annually and HMRC assess and send a P9 notice back advising of tax code for the coming year.

So for some reason HMRC decided to put me on a more favourable tax code for 2011/12. Obviously a mistake. Having spoken to them I am now on K160 tax code which means I get zero personal allowance.

The only benefits I get is private health cover contributions fyi, nothing else.

Ok, i'm now going to go on hold for an age to ask some questions on why they got this wrong. What a great tuesday morning I am having ;-)
Neil Williams - on 08 Jan 2013
In reply to Game of Conkers:

Ah OK, that is I guess the complication. Good luck!

Neil
Tall Clare - on 08 Jan 2013
In reply to Game of Conkers:

hello, sorry for the hijack but please can you mail me through the forum? Your profile says I can't mail you... thanks!
Skyfall - on 08 Jan 2013
In reply to Game of Conkers:

Do you have no bank/building soc interest at all?

If you do, you would also have a higher rate liability on that (which may be coming into the calculation) and which wouldn't be on your coding unless you specifically ask it to be. The bank only deducts basic rate tax at source and you seem to be indicating you are a higher rate taxpayer.
craig1983 - on 08 Jan 2013
In reply to Game of Conkers:

Ah simple then. Tax allowance for this year is £8105...40% tax bracket.... just over £3k.

Nothing you can do about it I'm afraid, unless you can argue that its their mistake and you don't have the money to pay a £3k bill.
Bjartur i Sumarhus on 08 Jan 2013
In reply to craig1983: Yes. Just got off the phone to them. Basically they guess your tax code and it's your responsibility to make sure it's correct. Pay the £3k by 31st Jan. That's that then. I think I will get a similar one for next years assessment as I have been on the wrong code up until yesterday.
Ferret on 08 Jan 2013
In reply to Game of Conkers: The tax code works reasonably well for individuals who fall into the 40% tax bracket and have total incomes less than 100,000. The only things you need to do there are ensure they tax you correctly on extra income (interest and dividends mainly) which are taxed at basic rate and you have to tell them how much you get each year so they can adjust teh next years tax code (you can minimise this admin and tax issue if you have a standard tax rate partner and just make sure all savings and investments are in their name... thats totally legitimate tax avoidance, not illegal evasion). Also, if you give to charity regularly plus gift aid sponsorship that annual amount can reduce your tax code for the next year. Its a tax payers responsibility (technically) to make sure the tax code is correct and includes correct adjustments for these sorts of things (i.e the bits teh tax man doesn't know about). If ou fll into teh £40 to £100k bracket they normaly don't send a self assesment and just expect you to phone up each year and get your tax code adjusted for each of these items

Where it gets more complicated (but they do send self assesments automatically as soonas they realise you are in this bracket) is that if you earn over £100k they need to reduce your tax free allowance by £1 for each £2 over £100,000 you earn until you have a zero tax free allowance. If you then need taxed a bit more on other stuff (work related perks, interest,dividends etc) you end up with a negative tax code.

If your income varies a bit (say a salary just under 100k and a bonus that might be 10 to 20k ish) their 'estimate' of your annual income may well be incorrect. If you are likely to fall into an annual income of between 100 and about 117k (i.e. 100k plus 2 times the standard tax free allowance) you need to keep a close eye on things and make sure their estimate is as accurate as it can be and be aware that if your income moves up or down (i.e. a good or bad bonus year) you will have over or under paid tax within that tax year.
Ferret on 08 Jan 2013
In reply to Ferret: I should also say that having 'variable' tax afairs myself I've long found it easiest to do my return as soon after the tax year ends as possible. That way I know how much I might owe soon (but still don't need to pay until 31st Jan) and I have a better chance of making sure my tax code is correct in say, June for the remainder of the year rather than doing tax return in Dec/Jan and finding that my tax code has been too high or low for most of this year too.
I realise thats no help now (and I have also had the 'you need to pay up in about 2 weeks' situation in the past) but it has made more recent years easier and more accurate.
Bjartur i Sumarhus on 08 Jan 2013
In reply to Ferret: Thx for your detailed reply. Yes, lesson learned here.

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