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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

Aibu to not think this is right? Tax related.

55 replies

DisappointedMe · 10/04/2015 11:24

I've name changed for this thread.

My DH had a big bonus in feb of this year, and it has taken him over the personal allowance threshold.

So we've since received a letter from HMRC basically changing his tax code, based on the last tax year's earnings, removing the personal allowance entirely.

His basic salary is just under the point where you begin to lose the personal allowance. And bonuses are not guaranteed.

So I've calculated that his pay from this month will drop by over £350/£400. It's going to be a real problem to shift money around to accommodate this loss.

I know as a family we are fortunate, but I thought that by the end of the tax year adjustments are made accordingly?

OP posts:
DisappointedOne · 10/04/2015 13:02

Perhaps she need to tell us then, Lottie.

youarekiddingme · 10/04/2015 13:06

Diappointed yiu do not need to justify how your DH got to earning a very good income. Although fair play to him for all he's acheived!

Everyone has the right to question something they a) don't fully understand and b) are not sure is correct.

However, I know nothing about tax so I'm afraid I'm no help there!

19lottie82 · 10/04/2015 13:10

Perhaps she need to tell us then, Lottie.

No, she doesn't. It's no ones business.

Corster7 · 10/04/2015 13:13

Good on him for doing something with his life, you don't need to justify anything.
Maybe the children he helps can see even with a background like your dh you can still make something of your life and not feel like your the slum of society.

DisappointedOne · 10/04/2015 13:14

Well, it's very hard to help then based on the information she's given.

Original poster
DisappointedMe · 10/04/2015 13:17

In total, last tax year through PAYE and separate direct payments, he paid nearly 60k in tax.

What a bastard.

So if you claim benefits you are treated with contempt, and if you pay high taxes your an arsehole.

OP posts:
Original poster
DisappointedMe · 10/04/2015 13:19

Oh, and as I'm a sahm I'm an even bigger arsehole.

OP posts:
OnIlkleyMoorBahTwat · 10/04/2015 13:19

If the loss of a few hundred pounds a month is going to cause you difficulties, your DH is going to have to persevere with the tax office, otherwise, if you just leave it for a year, when he completes his tax return for this year or the tax office just sorts his figures out, it will get sorted after the end of this tax year.

This happened to me a few years ago - I normally earn towards the top of the 20% band, but we did a big work project that required very long hours and they actually paid us some overtime which just put me in the 40% band.

Even though it was a one off, the tax office assumed I would be earning at that level in the future and they sent me loads of things saying I would have to pay extra tax - it took a year or two to settle down, but it has now.

merrymouse · 10/04/2015 13:20

Bonuses late in the tax year can be a bit tricky if your salary is around the £100k mark.

If his tax code didn't change to reflect his bonus and the fact that his salary was over £100k in 2014/15 (and it is likely that it didn't) the tax owed won't be collected by paye and there will be money owed in January 2016.

Tax codes are usually based on historical benefits in kind and salary as that is the best info that hmrc have. Therefore if you have more up to date/accurate information contact them.

However, if you get the code changed back and he gets a bonus again, be aware of the amount you will need to save from it to pay your tax bill.

blondegirl73 · 10/04/2015 13:20

A bit off-topic, but I'm wondering what your husband does to earn such an amazing salary? I always thought it was only financial jobs that paid so much but perhaps not? Can you share without identifying yourself?

DisappointedOne · 10/04/2015 13:21

Nobody is calling him a bastard. High taxation stings, I get it. It's one of the reasons DH and I now work through a limited company and pay nothing like that on our earnings.

But even so, not having a few hundred spare every month when you're earning several times the average should be cause for concern anyway. We can't help with much of that when you give no detail.

DisappointedOne · 10/04/2015 13:23

Lots of people earn more than that. Lawyers, council officers, senior civil servants, GPs, consultants, project managers, IT managers, politicians..........

Mistlewoeandwhine · 10/04/2015 13:28

He has done well in life considering his background. I am sure you are very proud of him - I would be.

OnIlkleyMoorBahTwat · 10/04/2015 13:31

Hmm at all those encouraging high earners to make use of loopholes to reduce their tax bill.

I thought the consensus on MN was that everyone should pay their share, and avoidance was immoral? We're all in this together, remember?

merrymouse · 10/04/2015 13:35

What loophole? Whatever his tax code he will still have to pay the correct amount of tax through self assessment. Tax code only affects what is collected by paye.

blondegirl73 · 10/04/2015 13:39

God, I honestly didn't know people earn so much - I thought it was just bankers really. I'm totally clueless when it comes to salaries - my husband and I both work in creative jobs and though he's quite well paid, I'm definitely not. In fact, a few times recently I've been taken aback by how much some people in 'normal' jobs earn. I must stop using my own salary as a comparison.

bedraggledmumoftwo · 10/04/2015 13:41

The main so called loophole is putting anything over £100k in a pension.

SanityClause · 10/04/2015 13:41

Is he likely to receive the same bonus this year? If not, telephone HMRC and ask them to adjust his code, based on the salary he is likely to receive.

A lot of HMRC calculations are done based on assuming this year's earnings will be the same as last year's. Which is reasonable, really, and they don't know that there is a change, unless you tell them.

Obviously the tax code does not change the tax he will pay overall, so if it turns out he does get another big bonus to take him over the limit this year, he will have a big tax bill to pay when he completes his self assessment for the year.

It is possible that the code has changed to collect tax owed for a previous year. If this is based on actual tax owed, and not an estimate, then the tax code won't be able to be changed.

OnIlkleyMoorBahTwat · 10/04/2015 13:44

Merrymouse Yes, the OP's DH will have to pay the tax, but it has also been mentioned on this thread that tax can be reduced by:

Putting assets into the OP's name, if she pays tax at a lower rate
Spreading the bonus over more than one tax year
Putting some into a pension to go back under the threshold
Putting your earnings through a limited company so you pay tax at a lower rate
Then there was the mention of stashing assets offshore but I assume that was tongue in cheek.

All totally legal, but not directly in line with paying your fair share.

Tutteredboast · 10/04/2015 13:51

In any system that had thresholds there wil be people who lose out. I was a bit peeved when the child benefit cap came in and I was earning about £5 over the threshold as the only earner when other families with two earners were getting almost double and keeping child benefit.
I guess you just have to accept that other years/times the figures will be in your favour.
That, or get a better accountant!!

TranmereRover · 10/04/2015 13:52

how putting assets in his wife's name is goign to help reduce his PAYE bill, i don't know... as for suggesting that supporting oneself in old age by making sensible pension provisions is somehow not on in terms of paying your fair share? I despair.

Tutteredboast · 10/04/2015 13:55

If he can work freelance through a limited company and pay himself, he will pay about 20% on the lot. Tens of 1000s better off.
Completely legal, morality of it??? Discuss...

bedraggledmumoftwo · 10/04/2015 13:55

It isn't really a loophole though, is it. Anyone putting their money in a pension, as encouraged to do by the government, gets tax relief at their marginal rate. It just so happens that the group of people this is most beneficial for is those earning between 100-120k as that is where the ridiculous 62% marginal rate of tax kicks in. If someone told me i was getting a 20k bonus and I would only see 7.6k I would probably put the full 20k in a pension instead. It is just logical. ( I am not in that band btw)

Unfortunately as soon as there is mention of six figure salaries lots of posters tube out and think that is the super rich. But it really isn't, it is just a bizarre glitch in the system that means the marginal rate at that point is higher than the top rate over £150k.

First work problem though

piggychops · 10/04/2015 13:57

Just fill out the tax return each year and it evens out eventually. Try to get the return in as early as poss each time.

merrymouse · 10/04/2015 14:00

He can't pretend that earnings from employment are limited company profits and it's up to his employers to decide when to pay him. (And that would only benefit him if they were sure he was going to earn less next year, which isn't really the point of bonuses).

I think it would be odd If they are married and the rental properties aren't in both their names. However, that wouldn't save him any tax on his bonus as his employment income already takes him over the threshold where he would lose the pa.

I don't see anything wrong with paying extra into a pension - the amounts you can pay in are limited and it is no more dodgy than having an isa.