Tax - HRMC claiming DH owes 7k

[goldenpepper]

Could really use advice. For a few years DH was self employed and as a result filled in a self assessment tax return. All fine - though in 2022 he became a full time paid employee of a big US company who operate payroll out of the US, but use a remote company to process the payments to European employees in their native currencies.

At some point after a few months of working for them, DH's tax code was changed, and in February of this year he received a bigger than usual salary payment that month. He flagged this to his company, and was told that this was a result of him being on the wrong tax code previously, and was a rebate.

Yesterday DH went to submit his online tax return, fully expecting to state that there was nothing to declare as he's an employee on PAYE. He was shocked to see that HMRC are saying he owes 7k - and this calculation seems to tie in to the 'rebate' somehow. Although it looked like he was paying the correct amount of tax each month - the payments didn't change after February, it appears as though he hasn't paid enough tax across the year - and now owes this amount.

Am I correct in thinking that if this is the US employer's cock up (or indeed HMRC's cock up for changing the code), it's not up to DH to pay it?! We don't have 7k to pay them for a start. Anyone experienced similar and what did you do?

DH was on self assessment, although getting paid by a large company. He ended up with a larger bill and had to pay it, even though it was the company that cocked up. He had to take out a personal loan to pay it.

Rebates of tax only ever come from HMRC.

The employer adjusted the tax code. However it is for the employee to ensure the correct tax code is used.

Also once the 2022/23 tax return is filed - I did mine last week Jan 2024 for the income in 2022/23 as a lot of people do - the HMRC system comes up with a figure which does not include your payments on account 1 and 2 already paid so often it looks immediately as if you owe a lot more from that 2022/23 tax year so he does need to check very carefully. It also takes HMRC I think about 3 working days after you file the return to show the sum owed to them for 2022/23.

HMRC issue tax codes to employers, but in complex situations like this they can often issue the wrong ones! Ultimately a tax code is based on looking back at facts and making projections/assumptions about the future at the same time, and they don't have a crystal ball, so sometimes their projections are wrong, which means the tax code is wrong. If you change jobs to a higher salary for example, they can't know that is going to happen.

The way they see it, it all comes out in the wash once the tax year is over and they can assess based on actuals, not projections.

That isn't how it feels when you're on the receiving end, of course. It feels deeply unfair, even though it's just a correction.

They appreciate people don't always have the money to hand, so will help you set up a payment plan to pay back this £7k.