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.

Exactly this. I’ve been where you are OP, but making sure your personal tax account is an accurate estimate of the expected earnings for the year gets rid of the problem. For some reason the value HMRC use is always a lower estimate than actual at the start of the tax year. Log in and change it.

Do you have a company car. When i filled out my self assessmnet I put in the full value of the car instead of the yearly value, that wiped out my personal tax allowance and said i owed £14K. I knew this was wrong. Corrected the error with HMRC and turns out they owe me £250.00. Might be worth throwing it at taxscouts and see if they can find what is wrong.

The OP doesn't need to pay anyone to find out what has gone on this year. I and several other people have explained it's because she's on a really bizarre tax code that has assumed she's due 23k as a personal allowance when really she is due nothing.

And HAHAHA about accountants having more luck speaking to HMRC. No we don't, we just bill clients for the privilege of being on hold instead of them. This is a pretty trivial situation which if, and when, she can finally speak to HMRC, should get resolved quickly. Problem is that HMRC are in such a mess at the moment (yet another under funded government mess)

Our accountants have never billed us for being on hold. I prepare all our tax returns, incomes , dividends, rents, expenses. Then send to them to accountant They've only charged extra once for capital gains tax issue which was complicated. £240 per annum for peace of mind.

I know someone who worked for HMRC 30 odd years. She admits it's a shambles now.

Oh I'd never tell a client they were being billed for that. But you can guarantee that in any fixed fee there will be something to take account for the fact time is wasted with HMRC if anything needs sorting out.

I really liked that web chat thing they introduced it was great for stuff like this, getting tax codes changed as you could minimise the window and get on with something else and wait for the ping when hmrc replied, now some bright spark and decided that agents can no longer use webchat for tax code changes they have to call

If you don't pay the Payment on Account, and it is accurate, you will be charged interest from the date the payment is due, up to the point it is paid. There is a second PoA that is due on the 31st of July.

So I got paid today and have underpaid income tax (according to my spreadsheet) by £1,300. So at least I can account for this as not my money!

Am going to battle with the HMRC phonelines again today. Tried twice yesterday but they weren't letting me queue just booted me off after the security questions.

Thanks so much for all the helpful guidance I can be much clearer now when I do finally speak to them. I have no deductions to account for other than pension which is taken by salary sacrifice and I pay tax on my health insurance but it's de minimis - about 1200 a year of benefit.

I will pay on account if I really must but I am hoping I won't have to if they can sort the tax code and just collect it normally.

Keep plugging away OP, as others have said, you should have been on a 0 tax code last year as your personal allowance was clawed back. This year you should be able to add the underpaid tax onto your 0 code so that is spread over the remaining 11 months this tax year. You ought to be able to do it all through tax code still (although I don't have experience as a top rate earner, so they may insist on some as a lump sum I suppose?)

As to how you got that whacky code in the first place - did you have a large lump sum pension contribution a year or two ago? HMRC work very much on the basis of what you had before will be the same again. So for example if you put £25k into pension in 2022-23 as an extra, last year's code would have assumed you'd do the same in 2023-24, hence your bizarre code.

As others have said, only an individual can query their tax code with HMRC. If they are generous, your payroll team might flag to you if you have a slightly odd one so you can do something about it sooner rather than later, but they can only process based on what HMRC tell them they have to use.

This is the sort of thing which should be covered in PHSE/finance for life in schools, as most people only realise if:

1. They've got a company car but not told HMRC - in which case huge tax bill when they finally correct tax code.
2. Lower rate tax payer put on W1M1 code when they change job - in which case refund due but might not ever even realise if they don't check!!!
3. Higher rate tax payer put on W1M1 code when they change job - in which case they will have underpaid tax and have a nasty catch up per 1.

Keep your address with HMRC up to date, look at the letters they send to check info used to work out your code is correct, and look at your payslip to see what tax code you're on folks!

Then have a lot of patience on hold waiting to talk to HMRC to correct it...

I have been on hold for 40 minutes so far. TBH the amount of time I have put into trying to sort this they're in danger of getting no tax from me at all, I do have to do some work at some point if they want their 50k of tax!

Right! Was on hold over an hour but once I got through they were unexpectedly really helpful.

The guy I spoke to first sorted my tax code (hopefully!). They thought I was going to pay an extra 23k into my pension last year so that was the reason for the old code. They don't know why they thought this - they could see I had not indicated this by conduct nor notice so this seems to be a glitch or some sort of human error.

I then got passed to a woman who deals with self assessment who talked me through the options for payment on account and agreed it seemed as though I wouldn't need one or certainly not as much as they were suggesting. We agreed that it would be sensible to wait a few months as I have until January to make the adjustment and I should have a better idea closer to then about how much (if anything) I need to top up by.

Thank god for that anyway and thanks again for the help, the call went very smoothly as I was able to articulate the problem very clearly thanks to this thread.

Ah fab news OP, well done on your perseverance! HMRC tend to be very helpful once you do eventually get through, it just takes so blooming long. I'm really pleased it seems like you've got it sorted at last.

It's possible they assumed you'd pay it into pension as it's the most tax effective way to deal with being marginally into the top rate? You end up with £13k less take home but £23k in your pension - so the £11k goes in your pension pot not in tax.

Most people who are only just in or over the 45% rate do it this way - it's tax planning not tax evasion & interesting that HMRC seem to have assumed that you'd do it anyway!

Hope your code all sorted to get you straight by March 2025 anyhow. Sadly persisting with the hold queue is the only way to sort it out.... A long desk based task to do while waiting, all your tax reference info near you & a well charged phone are the key items to an effective outcome with the HMRC income tax line!

It's possible they assumed you'd pay it into pension as it's the most tax effective way to deal with being marginally into the top rate? You end up with £13k less take home but £23k in your pension - so the £11k goes in your pension pot not in tax

I do pay loads into my pension but it's all as salary sacrifice - the weird thing they had assumed is that I would pay it in out of post tax income then claim back the extra from HMRC.

Totally not the point of this thread but I’m in awe of your large salary (you mentioned 140k plus big pension contributions, must be 160/ 180k plus) and wondering what sort of field you are in - banking / law / financial services?! Good for you!

That's very nice of you, I am in law (not tax law ha ha), I'm very old and have been doing it a long time! I head up an in house team at a biggish company.

Hmm, odd that they don't know why such a large Pension contribution projection was added to your tax code!

I don't suppose they mentioned ESC A19 (Extra Statuory Concession) which covers Official Error..... (some or all is written off as Revenue error caused underpayment)

I've forgotten the rules but googled and found this on an accountancy site

*When Extra Statutory Concession (ESC) A19 applies
An individual can request HMRC to apply ESC A19 if they believe that the underpayment has arisen because, following HMRC's receipt of information from the individual, their employer or the Department for Work and Pensions (DWP):

• HMRC failed to issue a tax code.
• HMRC issued an incorrect tax code.
• HMRC incorrectly repaid tax.

For HMRC to apply ESC A19, HMRC expects taxpayers to meet their responsibilities (as set out below) and for the following two circumstances to have occurred:

• HMRC notified the individual of the underpayment more than 12 months after the end of the tax year in which the information was received indicating that more tax was due or that the incorrect repayment was made; and,
• HMRC did not meet its responsibilities in dealing with information provided to them (see below for what HMRC’s responsibilities are and what counts as ‘information’).*

Does you situation fit these criteria?

rhe Criteria say hmrc notify more than 12 months after end of tax year, we are only 21 days after end of tax year so it’s way short

What annoys me about these situations is that when you get these requests, there is never an explanation as to why your tax code has changed. It causes people so much anxiety and stress. I guess there are people out there who get these messages and can't see a way out of paying what they think is a huge amount of tax and could end up suicidal.

I think HMRC has changed beyond all recognition since I retired 16 years ago.

I used to enjoy investigating and explaining why a person's code had changed or why they had over or under paid tax. It was really satisfying to be able to give clear explanations so the taxpayer understood (even if it was bad news).

In the years before I left there was over reliance on the computer system - new staff weren't trained in working things out without the computer, so couldn't explain under or over payments properly or spot errors in the information input.

I’ve worked as an accountant for nearly 30 years and I’m glad I know what I am doing as sometimes now when we call hmrc to query something we get told a load of rubbish and you really have to push to explain to the person why they are incorrect, it’s very much “computer says so”, I feel for people who just accept what hmrc tell them as correct (sometimes it is correct but too often not)

Which is why we still use an accountant. Friend high up the food chain told my brother that so much slips through the net now everything is centralised, whereas boots on the ground locally were able to help people or catch them much more easily..

Although the problem is even for accountants now it’s just not worth doing some levels of work. If op had contacted us to help with her tax code it’s not something we would touch with a barge pole, by the time you’ve done the engagement letter, money laundering checks etc the amount you’d have to charge for a simple query would be so extortionate it just isn’t worth it to the taxpayer. Even simple straightforward tax returns it’s being not worthwhile to do, we are having to bring in minimum prices no matter how straightforward something is as it’s just not worth bothering with, specially if it’s a one off

If op had contacted us to help with her tax code it’s not something we would touch with a barge pole, by the time you’ve done the engagement letter, money laundering checks etc the amount you’d have to charge for a simple query would be so extortionate it just isn’t worth it to the taxpayer.

Yes this is what I assumed. If the issue was that they were asking for money and I didn't understand why it was owing I would have spoken with someone I think. In this case the mystery is not the amount owed which I was able to work out quickly was correct but why they undercharged me so much and why I was on a silly tax code.

On another note raised by a pp - it has absolutely occurred to me that someone more vulnerable/ less able to negotiate the system could have been in real trouble.

There are 2 charities that help vulnerable people with tax matters - Tax Help for Older people and TaxAid. They have age and income criteria (so the OP wouldn’t qualify for their help) but this thread shows they are needed and they do great work.