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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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, I moved job due to redundancy, ended one employer Dec2013,

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Hi, I moved job due to redundancy, ended one employer Dec2013, started new one in Jan2014. I passed my P45 with all details. However my old employer seems to have deducted tax assuming I would have no more income in the tax year. My new employer, despite having the p45 does not seem to have deducted the right amount of tax by PAYE. When I have come to do my self assessment it looks like I now face a large bill. Am I right in thinking my new employer should have taken account of the details on the P45 and applied the correct tax code to pay the right amount of PAYE between Jan-April 2014? If they have made an error should I tell them to contact HMRC and deal with it as a PAYE error or will I hust have to pay the full amount now?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me what your pay and tax figures were for 2013/14 and what tax code was on your P45 and your P60 please.
Customer: replied 2 years ago.

I don't have the p45 just now as I gave it to new employer. I have final paycheck from old empoyer saying the following:

Tax YTD (2013-14):

Gross pay 54890.76

Taxable pay: 143.234.91 (I received redundancy payment)

Tax:51153.75

Tax code 851L

And my p60 from my new employer says:

This employment: Pay 19710.13, Tax deducted 5719.85

In previous employment : Pay 143234.91 Tax Deducted 51153.75

Total for year: Pay 162945.04 Tax deducted 56873.60

Final Tax Code K92 M1

The numbers from my previous employment match so I know they typed them in from my p45 correctly, but they don't seem to have deducted enough tac in the Jan-Mar pay despite knowing what I had already been paid? Have they made an error and how do I deal with it?

Expert:  TonyTax replied 2 years ago.
Thanks.

Did you have any taxable employment benefits such as private medical insurance or a company car?
Customer: replied 2 years ago.

I had a p11d from my old employer with £593 of health care benefit on it for the tax year.

I don't expect my new employer to have known about this of course but I think they should have known about my previous taxable pay etc as it was all on the p45. There is no health care benefit at the new employer from January.

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 2 years ago.

OK thanks. Any idea on time to complete and I will not bother you again until then? Many thanks

Expert:  TonyTax replied 2 years ago.
Give me 15 minutes.
Expert:  TonyTax replied 2 years ago.

Hi again.

Your income for tax purposes was £163,538 (£162,495 + £593). You are not entitled to a personal allowance for 2013/14 as your income exceeded £118,880. You lose £1 of the £9,440 personal allowance for 2013/14 for every £2 of income over £100,000. That's where the problem is. You were on a tax code of 851L, then it was changed to K92 M1. The M1 part means that any underpayment is ignored until the end of the tax year to avoid a big tax deduction in one month.

The first £32,010 of your income is taxable at 20% (6,402.00), the next £117,990 is taxable at 40% (£47,196.00) and the balance of £12,945 is taxable at 45% (£5,825.25). Your total tax liability is, therefore, £59,423.25. Deduct the tax deducted through PAYE of £56,873.60 and you are left owing £2,549.65.

I have assumed that you did not make pension contributions other than via your salary, if at all, or gift aid donations. You said you appear to be underpaid by about £3,000 but without seeing what other income you have disclosed in the tax return, I cannot reconcile the difference.

You need to decide before the start of the tax year whether to have your personal allowance taken away so as to avoid an underpayment, all else being equal. If your earnings were not what you thought they would be, you may get some of the personal allowance back after the end of the tax year.

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

Customer: replied 2 years ago.

Ok thanks, ***** ***** pretty much as I thought.

Just one remaining question. My code for the current year is 1000L. Surely it should have been altered in order to recover the underpaid tax?

I can pay it back, but don't want a big bill in one go. Who do I approach about it, the company, or HMRC do you think?

Expert:  TonyTax replied 2 years ago.

A tax underpayment for one year will generally skip a year and be coded in the next year but one. You are likely to have a similar tax underpayment problem for 2014/15 if you earn over £100,000. If your income reaches £120,000, you will lose all the personal allowance.

If HMRC spot your earnings level, they may take the allowance out of your tax code or restrict it.

Your employer won't be interested and HMRC will tell you that you are responsible for checking your tax codes. If you want to pay in stages, call the Business Payment Support Service a few days after you have submitted the tax return but before 31 January 2015. You need to give it a few days for the return to be visible to HMRC.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15842
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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