AIBU to be upset my PAYE tax was so (11k) wrong?

[Janome9300]

I have just (very early and efficiently) done my tax return.

Although 100% of my income is from a single employer and I am fully PAYE I owe an additional 11k for 23/24. In addition they are demanding a 5k payment on account for next year so I need to come up with 17k by 31 Jan next year.

I have been through all my payslips and done the maths manually and they are correct about the additional owing. I need to put away 1.7k a month between now and the payment date.

I am so sad. I have had money owing before but it is normally a couple of thousand, this has been a real shock. Thank god I did the calculation so early so I have a hope of scraping it together. I don't understand why it has been so wrong at source. I haven't had a massive pay increase or anything.

they could have a large pension contribution coded in to get the tax relief, you don’t see a breakdown so you wouldn’t know this and I personally wouldn’t want you knowing my personal financial affairs if you did my payroll

It’s just interest from the original due date there are no penalties as well for reducing payments on account. Technically penalties can be charged as well but it’s only for people who persistently reduce and I’ve never seen them applied in practise

And I wouldn’t ask what your affairs are but I would say ‘you have an unusual tax code so just make sure you check with HMRC’ and then I’m done.

Over 20 years of working in finance and payroll - never come across anything approaching a tax code giving someone more than 20K tax free.

I had a tax code like that when I was regularly doing £30-£40k into pension but not via salary sacrifice (work had no workplace pension then)

Of course the past is no predictor of the future so I needed to be sure I would keep that up or owe a load more tax.

For people saying payroll should still flag it...my organisation employs many thousands of individuals and payrolls focus is (rightly) on making sure payments are correct and on time. I also think there really does need to be an element of personal responsibility - in the UK we are too used to the PAYE system as few of us have to do ax returns, in other countries more people do tax returns and they tend to be a bit more on top of their own affairs and understand how it works. Finally....if people got used to payroll flagging unusual codes and for whatever reason payroll didn't spot one, or didn't spot something an employee thought they should...theoretically could the employee claim financial loss through payroll negligence? They shouldn't be able to, as the checking the code is the employees responsibility but you can see how some employees may argue the line was blurred and an expectation payroll would notify them had arisen that they relied on.

But the payroll person would know how much pension was already going though payroll, and how much more they could feasibly be contributing within annual allowance limits. That much tax relief and no personal allowance would be unlikely.

And no harm in flagging it anyway. All the employee has to say is, “yes that tax code is correct, thanks for checking”. The payroll person won’t care why it’s correct, just glad the employee has checked it.

Agreed…I work for a massive organisation and the majority of responses we’d get to notifications suggested by others would be from people refusing to contact HMRC, and complaining to us.

I imagine it’s very dependent on organisational culture.

With real-time information your tax code should automatically be updating and applied by your payroll throughout the tax year.

Even if you received a large bonus/redundancy payment in one month, things should have corrected themselves a couple of months later.

I pay a huge amount of tax each year, so I watch my payslips like a hawk, and enter all the inputs into an excel calculator to double check payroll calculations, which is something you should consider doing going forward.

You used to have your fill in a tax return if you earned over £100k per annum, however the threshold changed last year to submitting self-assessment if earnings over £150k per annum, even if all taxed via PAYE.

I make large pension contributions outside of my work pension (as I’ve paid of mortgage and am getting old) but my work wouldn’t know about these. I suppose flagging it is ok I just think it’s sometimes giving the wrong message and it then becomes expected when ultimately it is the employees responsibility and employees should realise this. I think it’s one of those things where you are trying to do employees a favour, it becomes expected and then you end up getting blamed in cases where their code was wrong and you didn’t flag it up

There's a £3k underpayment of tax limit to that, and you need to file your tax return online by 31 October of the year following the close of the tax year.

You can file up to 30 December and get collected through tax code following year if you file online

This is complete and utter nonsense.

HMRC send employers changes in tax codes every month, and the employer must apply that code.

Employers cannot take instructions on tax codes from employees.

If an employee believes they are on the wrong tax code, they need to ring HMRC to explain their situation (e.g. I got paid a £20k bonus this month, it's not my regular salary), HMRC will change the code if appropriate, and send a notice of the changed code to both the employee, and the employer to apply to payroll.

@Morph22010 has that rule recently changed? I know a couple of years ago I tried to do that with mine in December and was told I was too late!

No it’s been like that for years, I can’t remember it ever being different, it’s still 31 October if you file a paper return though

Legally the employer is MEANT to use the tax code HMRC send, but not every employer does do this. Some payrolls are absolutely crap so whilst employers are “meant to” use the tax code sent, they ultimately can and often do use random tax codes. Hence why the responsibility always falls back to the tax payer to make sure it’s correct.

Thanks @Morph22010, that's really helpful to know.

Due to being an additional rate payer and having a side NED role, my top up tax is usually about £3k, plus I'm usually late in pulling all the numbers together, so knowing that will come in VERY handy!

2361T m1

Id guess the cock up might go further back. Its really, really weird to have a tax code with a higher number than the PA. I can only imagine it means they thought you were due a refund when actually you weren't

I'd be grumbling at your payroll team - Id suspect they've done something that caused it.

Is it possible you've had a non cash income thats confused things? Like an award of shares without some being sold to cover tax?

HMRC send employers changes in tax codes every month, and the employer must apply that code.

And yet its possible for them not to.

Hmrc got my code wrong due to a complicated set of circumstances. I worked out what it needed to be and told them. They notified my employer. My employer changed me from the emergency tax code theyhad had me on to a different, still wrong, emergency tax code. Neither was the code HMRC provided to them.

You'll pay much less tax going forward if you put your earnings over £100k into a pension. You are effectively taxed 60% on earnings between £100,000 and @£125k due to the loss of personal allowance on salaries over £100k. If you put the money into a pension you don't lose your personal allowance and you'll get tax relief on the contributions.

OP I'm sorry you have all this to deal with but glad I clicked on the thread

Now I'm not sure whether payments on account can be reduced or not. As a freelancer, I find payments on account to be bonkers and very annoying - I missed a chunk of work time last year as I was ill, so now they owe me money.

I don't understand why they want payments on account but maybe someone here knows, lots of people must have variation in income in each year.

Have they always wanted payments in advance? I remember one contact telling me to put away a 1/3 of my earnings so I was never caught out by a tax bill. I'm not a high earner.

Just remember it’s 30 Dec not 31st dec, no idea why it’s not last day of month

It’s just due to timing really and getting tax in earlier. So say you started self employment on 6 April 2023 then your first tax year would be to 5 April 2024 but you wouldn’t have to pay any tax until 31 jan 2025, which is only just short of two years after you first started earning so hmrc have had to wait all that time for their money. payments on account mean that for subsequent tax years the tax is brought forward so it’s closer to when you earn it, if you have same self employment every year it usually evens out so each half yearly payment is approx the same amount

Call HMRC and ask them to put you on code 0T

You have payments on account as less than 80% of the tax owed has been collected through your tax code

If you get your code changed now you can reduce the payments on account down to £0, assuming no P11d or other income

@Morph22010 Sorry but that's exactly the bit that doesn't make sense to me - the assumption you'll earn the same.

why can't they bill at the end of the year when I know what I've earned?

honestly, I'm not someone who criticises for the sake of it, I just think it's an odd system. The money they owe me after I wasn't earning should be in my bank account, not theirs. I know it'll get here but still seems wrong way round to me.