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Original poster

Maternity pay tax question

24 replies

KJ007 · 15/03/2013 18:20

I'm hoping someone can help me with this as payroll and HR have been useless and I can't even get through to HMRC!!

Basically I've been made redundant but am entitled to SMP paid by my company. They have paid this in a lump sum today and I have been taxed on it at 30%.

I just wanted to check if this is correct tax rate or if I can expect to receive a rebate as, after NI and student loan repayments I have less than half the gross amount to live on for the next 9 months!! My taxable earnings for the yr are less than £35k and my redundancy payment wasnt a lot.

Any advice would be much appreciated!!!

OP posts:
ChablisLover · 15/03/2013 20:10

Is national insurance included?

All in with tax and ni, there should be a 32% deduction on the gross.

ChablisLover · 15/03/2013 20:21

Your redundancy may also be taxable dependent on the circumstances.

Together with the smp, normal pay it may have taken you over the threshold

ChablisLover · 15/03/2013 20:22

Sorry me again

Sorry to hear you've been made redundant its the pits and doubly so when pregnant

Hope something turns up soon.

ceeveebee · 15/03/2013 20:34

What a shame they didn't allow you to wait until the next tax year as you would have probably not had to pay any tax on it if its less than £9k.

Payroll is worked out by your HR dept on a year-to-date basis so they will know how much you earned for the tax year and so it's likely to be correct unfortunately. If you want to check you can enter your figures into the tax calculator on Mr Anchovy's website (mumsnetter accountant - you'll fm find it easily by googling it)

Best of luck

Original poster
KJ007 · 15/03/2013 21:56

Thanks for your replies

The 30% was income tax, also got NI and student loan deductions on top of that! My redundancy payment was way under the tax threshold and even with the mat payment I am below the personal allowance for the 20% tax code

I think I may be on the wrong tax code- 0TM1

OP posts:
ChablisLover · 15/03/2013 22:27

Oh you are on the wrong tax code. For a basic rate tax payetrr with no benefits etc it should be 810l

0t is for high earners over £100k!

Would try and ring Hmrc again to get it changed and a rebate should follow on at the end of the tax year

It took me 1/2 hour to sort out my tax code and I'm a tax adviser for a living! It so peed me off.

ChablisLover · 15/03/2013 22:28

Oh the m1 bit means its not being calculated cumulatively so you prior month earning is not considered.

ceeveebee · 15/03/2013 22:31

Ah - i think that code is used when a payment is made to you after your p45 has already been issued - would that sound correct?

What you need to do is add up the figures for taxable pay from your p45 and this payent, and then check them using a tax calculator like the one I refer to above - use the tax code from your p45 or last payslip, not the OT code. This will tell you how much tax and NI you should have paid for 2012/13. You can then compare to what you have been paid

ChablisLover · 15/03/2013 22:31

Sorry too much Wine

0t means all allowances used or reduced to nil - generally high earners

If you can phone on Monday and explain to get it changed

How long have you had this code?

ceeveebee · 15/03/2013 22:32

I think OT is for payments made after p45. I am >£100k and my tax code is not OT

ChablisLover · 15/03/2013 22:35

The p45 issued should include redundancy and smp.

And be issued in last tax code.

Did your p45 include these?

The 0t code is used when a p45 hasn't been issued and you've started a new job and not have p45 or p46.

Sounds to me like Hmrc have been up to their tricks with incorrect tax codes.

ChablisLover · 15/03/2013 22:37

Ceeveebee - do you do a tax return?

All my high earners with no personal allowance have ot code and all income taxed according to the tax bands.

ceeveebee · 15/03/2013 22:39

It is very common for redundancy payments to be made after p45 already issued. We do it a lot in my company.

From HMRC website: www.hmrc.gov.uk/paye/employees/start-leave/leaves-retires.htm#1

PAYE tax on standard payments
In most cases you must work out, record and deduct PAYE tax as usual on any standard payments that you make to your employees when, or after, they leave your business.
However, if you have already completed a form P45 for the employee and you make a further payment to them, then you must take the following steps:
deduct PAYE tax using code 0T on a week 1/month 1 basis
enter this as the amended code on the employee's form P11 or equivalent payroll record
enter the payment and the PAYE tax you've deducted on the employee's P11 or equivalent record
give the employee a letter showing the date of the payment, the gross amount, and the PAYE tax you deducted and confirmation that the payment is a post-leaving payment
You must not give the employee another form P45.
You do not need to notify HMRC at the time of making the extra payment, although you must ensure that it is recorded on form P14 at the end of the tax year.

ChablisLover · 15/03/2013 22:41

Ah - I hadn't realised that ceeverbee.

ChablisLover · 15/03/2013 22:44

But surely she has still paid too much tax and if she's still in br band as the ot code should be it should be taxed accordingly at 20% not 30%

ceeveebee · 15/03/2013 22:47

There is no 30% band as you know, it will be partly at 20% and partly at 40%. It is impossible to answer unless you add all the taxable income for the tax year together and thats what I have suggested above. Any taxable element of her redundancy (eg pay in lieu) and smp may have pushed her into higher rate tax.

ChablisLover · 15/03/2013 22:52

But op stated she doesn't earn over br threshold

If p 45 issued then additional payment taxed at ot tax code should be taxed at 20% according to the tax bands as its new income as p45 already issued and this new income is taxed in line with thresholds on a m1 basis so it's not cumulative and prior income not included.

If its gone over br threshold I agree it would be partially at 40%

BoffinMum · 15/03/2013 22:56

I got accidentally put on the £100k+ code, so I phoned them late one afternoon and it was sorted very rapidly. I think this has happened to a lot of people.

ChablisLover · 15/03/2013 23:01

Boffin - I've had a lot of clients ( and I mean a lot) ben issued with incorrect tax codes.

The amount of time spent on the phone to get them changed is unbelievable.

And now they are saying in some cases I have to write to them to get it changed!

MrAnchovy · 16/03/2013 00:58

Interesting discussion about when 0T may be used (you are both right by the way) but it doesn't help the OP get this sorted out Grin.

Refer to this page and note the part about calling HMRC first if you have been made redundant.

ChablisLover · 16/03/2013 07:01

Agree mr anchovy - an interesting discussion but no further on.

Contact hmrc - I think I said that but be prepared for a long wait on hold as op had has already encountered but its the only way to sort it out.

Original poster
KJ007 · 16/03/2013 08:51

Thanks all, I havent actually received my p45 yet so will wait until I have it then call HMRC. They don't make it easy do they?? Yet if I had underpaid I'm sure they'd be on my ass faster than you can say incorrect tax code!!

OP posts:
ChablisLover · 16/03/2013 10:09

You'd be surprised op
I've seen cases going back 3/4 years and now they are reclaiming under paid tax.

Good luck though with everything

Hope all goes well for you

ChablisLover · 19/03/2013 13:42

did you get anywhere with HMRC OP?

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