AIBU to find HMRC really confusing?

[Hmrcmakesnosense]

To preface - I know I am very fortunate to be in the position where I have enough money to owe tax and I absolutely do not mind paying it

BUT - I am completely baffled by HMRC, tax codes, untaxed interest and tax returns.

Two and a half years ago we sold our house and have been renting in the catchment for the school we want DC to go to. Eldest is there, hopefully youngest will get in next year. The plan is then to buy and not have to worry about catchment.

As a result, I have had quite a large sum sitting in cash in my account - I have been using NSandI 1 year bonds and the interest paid so far has been in tax year 24/25 and the current tax year. DH pays 40% tax and I pay 20% so we decided this was the best way.

I contacted HMRC via their webchat as I wasn't sure how to declare the interest and was told that, although they are given interest data from banks, as I have received over £10,000 interest I still have to do a tax return.

I owe just under £2,500.

I duly set up my account. Started the return and all seemed ok. First mistake - DH told me not to submit it until January otherwise we would have to pay the tax immediately and it would be better to have it in our account longer... (I just wanted it sorted!).

Then in early December I get a notice for a tax code change - my payroll department called to query it as it takes me into a negative personal allowance. I did not understand the figure they have quoted for unpaid tax, it bears no relation to what I actually received. I tried to call HMRC (couldn't get through), used the web chat but got nowhere - was told I still needed to do a tax return and that "it would all sort itself out in the end".

I panicked, updated my tax return with the new tax code, ticked the box to pay now and it spat out a number I needed to pay (£970) - I paid it.

Got my payslip today and I have been deducted additional £600 tax. Which is more than I thought it would be based on the HMRC figures on my coding notice (but makes sense in terms of the real figure that I owe as there is only 4 paydays left for the tax year). I had anticipated £250 additional being deducted and planned on that basis.

So now DH is annoyed at me saying I shouldn't have done the return at all, HMRC clearly have it all in hand and now I have paid almost £1k for no reason.

TBH I prefer paying a bit more now as it should hopefully mean less going out next year when we will (hopefully!) be in the process of moving. I think I have paid on account for next year - it really isn't clear. However, it now leaves us short from what we budgeted for as my pay will be down £600 a month until the end of April.

BUT - the process has been so difficult! I have no idea what figures HMRC are working from, the coding notice makes no sense (my payroll also said the figures I gave them do not match) and it is impossible to contact them.

I am relatively intelligent (honestly!)and tech savvy - how would an elderly person (and probably more likely to have this level of savings) cope?

Aargh - surely there must be an easier way? HMRC could share on your tax account what reports of untaxed interest they have received and you can confirm/ amend them?

Just be aware that HMRC do make mistakes so make sure you understand your figures and your situation.

I’ve had two separate instances when HMRC have tried to fine me for either not submitting a tax return (I was non-resident for 3 years) or for not paying overdue tax and BOTH times they were wrong.

It was eventually sorted out but only because I keep my own clear records (I have a Finance background), had correctly completed and submitted everything to them in good time and presented a strong case proving that they were incorrect. It was time consuming and one of my cases required me to appeal (even though the mistake was clearly theirs!). The fines were eventually cancelled both times but if I had trusted that things ‘would sort themselves out in the end’ then I would have been £3k worse off.

I'm retired and have to pay tax on savings interest and a property rental. As I don't earn via payroll, they insist I have to pay over 1K upfront for 2025/26 by end of January even though I might not even have any taxable income next year. I assume I'd get a refund if so.
But it is plain to me that you are expected to pay for next year in advance, if this helps at all.

Thanks for explaining. I can see how it’s relevant to the company directors’ tax returns. To be clear, i was a lowly employee not a company director. So I'm still not clear on how it’s relevant to the tax I owe?

Absolutely not relevant for you, but possibly for another taxpayer.

In both registering for self-assessment and completing the returns, HMRC draw the self-assessment questions as widely as possible to catch as many taxpayer scenarios as they can. This is why most people end up either needing to leave boxes blank or answering no.

It also provides HMRC with the evidence that a taxpayer told them yes or no to questions that they perhaps should have answered with the opposite, if there are any issues down the line.

There will have been many other non-relevant questions that you would have answered on the form that you could immediately answer, however I guess the close company question would have been annoying as you would have had to look up what one was before answering the question.

Yes maybe that’s all it is. However this does seem different to me. Are you saying that some people will be taxed differently depending on whether they work for a close company or a non close (open?! Distant?! I don’t know what the opposite is 😂) company? Not as company directors, just employees?

I had to google plenty to work out what it meant, this one stuck with me because I couldn’t believe the structure of a company could possibly have implications for how much tax its employees pay. Whereas most of the other questions which didn’t apply to me (do I own any property? Do I claim child benefit? Do I have a pension?) I could see the relevance to my tax affairs.

Close company rules are only relevant for directors/shareholders, not employees.

From an HMRC perspective it’s perhaps easier to leave all questions in for all taxpayers (company directors, employees, pensioners, self-employed etc) to complete, rather than HMRC designing the form to automatically exclude irrelevant questions e.g. in this instance if you tick that you are an employee.

HMRC rationale may also be that these questions appear on the paper forms, so no point removing them in the online version for those it doesn’t apply to.

There will be many examples of questions which don’t apply to everyone when completing a self assessment return e.g. I’m sure it asks if you have investment income and whether any companies invested in are in an EIS. These taxpayers get tax relief on their investment income approved EIS. If it doesn’t apply, you just tick no, and move on to the next question.

Given this question was in the section about my employer, in the employment section, it sounds like it won’t be relevant to anyone completing that section! As I thought.

Thanks for explaining 🙂 It was my first time completing it and to be honest I found it all very confusing. I know they advise to use an accountant but due to being on mat leave and starting my own business I only owed about £200 in tax for the year so couldn’t justify/afford that expense. Maybe next year…!

Not helpful but I have to say it’s peak MN when the OP feels the need to apologise upfront for earning “so much” that she has to pay tax.

You’re responsible for paying the correct amount of tax. The tax returns due now are for 24/25. You don’t have to pay the tax bill immediately, but must pay by the end of January.
Your tax code on your payslip is for 25/26. That tax return will be due and payments needed by Jan 27.
Have you populated the correct Tax Year info into your 24/25 return? The HMRC are generally more understanding if you raise an error yourself, than if they find it.

For this tax year, the best thing you can do is start a spreadsheet. Input your gross pay, net pay, tax & NI paid each month. Then total what you’ve paid & compare it to what the HMRC calculator says you should’ve paid.

Then, in the same spreadsheet add up all interest from all sources, and see if it’s above or below your £500 / £1,000 tax free interest allowance. If the money is in joint savings you can apportion half the interest to you, half to your partner. This is where HMRC do get it wrong. My parents both had the whole amount attributed to each of them. Print your statements as evidence in case of future audit.
And finally, an ISA allows you to earn tax free interest. You both have £20k this year, and £20k next year allowance which is £80k you can potentially save without paying tax on the interest. Also consider the FSCS protection limits, as these may apply also, hence you may need to spread across more than one bank.

Tax codes etc are definitely confusing and HMRC vary in how helpful they are in explaining. DW has had problems with her tax for three consecutive years, starting with a mistake by HMRC, which they admitted. Some of the people she’s spoken to have been really helpful in explaining what happened, why there is an ongoing problem and how to avoid it( well two people out of probably 12 calls) The others just seem to churn out the, it’s your tax code, your responsibility nothing to do with us mantra. We could literally paper a wall with the tax code changes she’s received this year alone

25/26 is due January 2027. You don’t pay tax in advance of the tax year.

You do if you fall within the rules for payment on account, which the poster you were replying to does.

https://www.gov.uk/understand-self-assessment-bill/payments-on-account

Get an accountant is my number 1 piece of advice for anyone with ££. They are cheaper than you might think and have saved me way more than I've paid for their services.

You do pay tax in advance in some instances. You should check your facts before misinforming people about something that's already complex and confusing.

Yes HMRC are a total nightmare. I have an accountant and even she thinks the same.

You should read other people’s more helpful replies before posting comments.

Very confusing. I also get letters saying completely different amounts to what is said online. Hate it.

There used to a HMRC advert on tv about remembering to do your tax return.

The strap line was “tax doesn’t have to be taxing!”

Oh how hard I laugh.

(I too am a qualified CA and baffled every year by my tax coding and deductions).

No they won't. It's self assessment - you are supposed to tell them if you meet the criteria for completing a return.

op if you haven't already got one, set up a personal tax account. You will then be able to see exactly how the paye code is made up.

if the code is for estimated tax due in the current year due to interest, you can ask for this to be removed if you prefer to pay via self assessment,

it's likely that Hmrc will have done a "simple assessment" for the bank interest. Sadly the two systems at Hmrc don't speak to each other. The simple assessments are often incorrect and just cause confusion.

Hello. I came to the money matters board to ask a q about tax and I’m very glad I found this thread. I am not alone. I knew I wouldn’t be. Not sure if I should be starting my own thread or adding my own situation here…

Essentially I have a day job with tax above personal threshold and it’s easy peasy PAYG. I have another seasonal job and that’s PAYG too. All good. But, I started selling on Vinted (flipping from car boots). This is where I come unstuck. I started earning from this in April 2024 and in Jan 25 I submitted a tax return to declare my earnings to that point. I was confused as I still had feb and march to go until the tax year ended. How would I know what I would earn? But my hubby is self employed and has to pay in advance so I just thought this was normal. So I submitted my earnings to that point and that this jan I will add on the 2 months and then the rest of my earnings for apr 25 and Jan 26. I think this must be all wrong! I went online to my personal tax bit so I can see my tax codes and I can’t change anything for last year and they changed my tax code to collect 20% tax of the £800 odd I earned from flipping. Which surprised me as I thought I got the first £1000 earned tax free for selling. I have no idea what I’m meant to submit now this month for apr 25 - Jan 26 and I know that I won’t get to speak to anyone. You don’t know how many hours I have searched online to try and find a straightforward guide to help me. If you’ve read this far you deserve a knighthood.

For tax returns it's essentially the year before. So the next tax return due by 31.01.26 is for the year 06.04.24 to 05.04.25, so if you only started trading in April 24, it was the 24/25 return you should hand been completing.

the £1k trade allowance - it depends. You can either claim the £1k allowance or actual expenses, not both so did you claim the actual costs of the items as expenses?

Thank you fee being so helpful. Ok so i submitted the return for last year, last year. I will resubmit these figures next week then for my Jan return. Then to rectify the mistake, can I write to them to tell them that I erroneously submitted these last year - that they shouldn’t have had a return? Argh.

Re expenses I have a log of what I paid for each item, what it sold for then took off p and p and fees so I just submitted the total profit figure. I guess I get taxed on all of these returns. Again, you’ve taught me more in your one post than hours searching online 🙏

You could do an amended return for the 23/24 year, removing the self employment - and put a note in the any other info box. Needed to be smended by 31 January though

I actually had a situation a couple of years ago where I had both a PAYE underpayment and a self assessment underpayment for the same tax year (messed up payroll when I started working for HMRC ironically and child benefit high income charge). So the same underpayment for the same tax year being recovered twice. Neither paye or SA depts in HMRC could help me because they don’t deal with both taxes. It was chaos and the only reason I got it sorted easily was because we had a special staff helpline. So - be very sure it’s for different tax years before you decide that’s the problem!

Thank you tigger- this will be my fun job tomorrow. Thank you so much for your time in helping me. I really do appreciate it. Tax doesn’t need to be taxing eh! 😖