Underpaid Tax / Medical Insurance

[VimtoLemonade]

Hi all

I joined my workplace in 2021. I get private medical insurance through them. They said it comes at no cost to us and the tax is adjusted so I went for it

Fast forward to today, I got a letter to say I have underpaid and owe £171. They said they would take it next year from April 2024 till 2025, however on the next page it said I need to pay by today. I only got this letter yesterday (online) I wasn't able to get through to them as lines were busy so they weren't accepting calls. I paid the full amount.

I'm just wondering how do I ensure this doesn't happen again next year? I will be on maternity leave and don't want to be hit with an unexpected cost. Do I ask Payroll if the tax code is right, or do I ring HMRC? Sorry I have no experience with this stuff. I feel like just cancelling the private medical insurance as i'm not able to afford it again if they come back with another letter

They said I paid tax on £172 of the medical insurance rather than £1082. I thought payroll would ensure I am getting taxed correctly.. I know I owe them regardless but main worry is how to makesure this doesn't happen again. Please advise.. thank you..

Forgot to mention, they said this was for tax year 2022/2023

Have you seen your tax code for year ending April 2024? They may have already adjusted it to take in to account your medical benefit. If not you can ask them to do so.

@Hellocatshome i'll check it for next year. If they haven't adjusted it, do I ask payroll to? Or is it HMRC? Sorry for the silly question and thank you!

You have to ask HMRC to do it, payroll can only use the tax code they are given by HMRC

Yes unfortunately you should have checked your PAYE code to make sure the full medical benefit was included and then got it sorted at the time.

Ask your payroll what the taxable amount is for 2024/25, make sure the figure matches what’s on your PAYE code and if it doesn’t, let HMRC know. I’m pretty sure for current year you can update that on the website rather than sitting on hold for ages!

Okay, so I just had a look and they have changed my tax code in July 2023. Under "reason for change" it says because my medical insurance has increased from £171 to £1026. I will speak with payroll tomorrow. Thank you all for the advice

You need to talk to HMRC. Your firm's payroll have no control over your PAYE tax code and can't change it without HMRC telling them to. They and you should receive PAYE coding notices at the same time from HMRC with any tax code changes. Keep an eye open on your post each year to look for, and check, PAYE code change notices as they're issued by HMRC., and then you can contact HMRC at the time if it doesn't look right.

Also keep in mind that as it’s a benefit in kind the value will be reported on your P11d after the end of the tax year and then your tax code will be adjusted, so for PMI you’ll nearly always be ‘paying’ a year in arrears. What it also means is that if you stay in a scheme over two tax years and the rate increases, they’ll continue to tax you on the previous value until they get the new P11d, so it can mean from April to say July you’ll be slightly underpaying.

My employer payrolls these benefits monthly now (so it doesn't go on a p11d anymore). I would check with hr as it may have been misreported and you have already paid the tax at source. What do your payslips say?

@Chocolatelabradorsarethebest ah makes sense now. I guess it wouldn't have felt like a pinch if I had just let them take it out my wage every month but because i'm on maternity next year and I panicked I just paid it all in one go yesterday. I will be sure to keep checking government gateway from now on to makesure the tax code is right

@needtofatoff so i had a different tax code all the way up until this July (where they changed it to a new one and mentioned the medical insurance) so hopefully wont be any issues next year but of course will give them a ring just to makesure

Thanks all so much for helping me figure it out x