Being chased for underpaid tax

[FlyingontheGround]

Hi,

I’m wondering if anyone can advise me. I formerly worked for a local authority where I had a car through a salary sacrifice scheme. I gave the car back in December 2022 and left the authority last summer. I received a letter a few days ago to say that for 2.5 years of the 3 I’d had the car, my tax had been miscalculated and I owe over 2500 to HMRC which my former employer has to collect from me. Is there any point in contesting this of will I just have to pay it?

Has the employer actually paid HMRC?

I'd certainly want to see and understand the calculation. Also, if the employer was at fault why they are now trying to get you to pay up?

I don’t know if they’ve paid them.

I’ve not seen the calculation. I don’t know why, all my payroll was just done through the authority so I’d say it’s their mistake but I doubt that means I don’t have to pay it does it?

You need to understand how and by whom this was miscalculated. Did you do self assessment or was it all done through PAYE? If your employer got it wrong I would complain to them that it's unfair to expect you to pay for their mistake. If they insist offer to pay in very small instalments.

Very odd HMRC aren't asking you to pay them directly, that's what usually happens if you owe them money. Or did your employer pay HMRC the right amount, but failed to deduct it correctly from your pay?

So basically the former employer says you owe us £2,500 pay up or else?

I'd suggest replying and asking for details of how exactly the situation has got to where it is. If you need further help then try an outfit like Citizens Advice for support.

Thanks, I’m waiting for a call to see if can understand it more. I think they will allow me to pay in instalments but it’s just a bit galling they’ve got is so wrong for such a long time, the amount coming off my pay at the time was as anticipated. My circumstances have changed now, I earn a little more but I am a single parent and I could do with not having another big bill each month while this gets sorted out.

If it's their error and there's no easy way you could have known I'd be telling them to stick it where the sun don't shine!!

It's your personal responsibility to ensure you are taxed correctly. Your employer does a P60 yearly which goes to HMRC but that can easily then take 18 months to be processed, so there's often times people have a new benefit or another change and an underpayment builds up.

Always speak to HMRC yourself if you get a new benefit, a change of circumstances (e.g. coming off childcare vouchers, claiming child benefit, etc.) and ensure your tax code reflects the current situation.

You will have to pay back the owed tax, but hopefully in installments from your salary.

I had something similar (ish) happen to me but it wasn't my error as the payroll Co had the wrong tax code (which I probably could/should have identified but didn't). As I'd received too much take home pay I had to pay it back - didn't make any difference whose fault it was. Unfortunately for me the underpayment was about 8k. Hope you get it sorted.