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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hello and happy new year I am in the process of completing

Resolved Question:

Hello and happy new year
I am in the process of completing my 2013-14 tax return online and have a question about my tax free allowance(TFA).
I received my TFA in July 2013 for 9392 GBP and I subsequently paid 40290.75 Income Tax on gross salary of 127,192 GBP.
THE ONLINE CALCULATION SAYS I HAVE PAID TOO LITTLE TAX AND OWE 4138.20 GBP FOR 2013-14.
Could you please advise if this is correct or not?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

As your income was more than £100,000 in 2013/14, you lose £1 of the personal allowance (£9,440) for every £2 of "adjusted net income" over £100,000. So, at an income of £118,880, you have no personal allowance left.

Your taxable income is £127,192. The first £32,010 is taxed at 20% (£6,402.00) and the balance of £95,182 is taxed at 40% (£38,072.80) leaving you with gross tax liability of £44,474.80. As £40,290.75 in tax was deducted through the PAYE system, you are left with an underpayment of £4,184.05.

Take a look here for information on personal allowances and here for information on "adjusted net income".

The fact that you were given a personal allowance in your tax code does not make the code right. Tax codes are not always correct and need to be checked like any other document which affects one's finances. If you know that your earnings will exceed £100,000 in the next tax year, you might consider having the adjustment to your tax code made in advance of the start of the tax year so as to avoid an underpayment as much as is possible. Its possible HMRC will do that in any event in the light of your 2014 tax return.

I hope this helps but let me know if you have any further questions.
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