AIBU to ask a HMRC Question?

[Christmascrazyalways]

Hi, sorry posting for traffic!!!!!

On my HMRC tax account it says I owe £1,055.00 - below this it says - to collect this we have reduced your personal allowance by £5,277. This means you will pay more tax until 5 April 2022, so that we can collect the £1,055.00 owed.

Hoping someone can save me HOURS on the phone to HMRC and tell me why if I only owe 1k, why has my PA been reduced by £5k?

Because the 1055 is the tax you would pay on the 5277

Because you are taxed at 20%. So you will be paying tax on £5k more income, 20% of £5k is £1k so that's the tax paid back.

Personal Allowance is the amount you can earn before you have to start paying tax. By reducing this they can collect the additional tax from you e.g. you will pay the 1k on you owe as tax on the 5k that is no longer tax-free.

As above. For every £1 you earn above your personal allowance, they deduct 20p in tax. So you need £5000 of earnings for them to collect £1000.

I'm not very good at explaining but here you go.

If you earned £20000 and your threshold was 12570 then you pay tax on 7430 of income which is £1486.00 of tax

As you owe tax they have reduced your threshold by 5277 which means you earn £7293 before paying tax. The tax on an income of 20k and this threshold is £2541.40.

£2541.40 less £1486.00 is £1055.40 which is the tax you owe.

HMRC has online chat - much shorter waiting times than phoning.

What they said ☝🏽