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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have received notification from HMRC that I have underpaid

Resolved Question:

I have received notification from HMRC that I have underpaid income tax for 2013/14 and owe £158. I have checked my payslips and my tax code has been correct for every month bar March 2014 when my new employer deducted tax at my old tax code of 885 when it should have been 944. I have looked at the information that HMRC have put in the letter and as far as I can see, they have got the code incorrect. My question is how do I sort this out. I have rung the number for HMRC on the letter and on more than 2 occasions been left 'holding' on the phone for longer than 20 minutes without getting through to anyone to speak to and I have rung the number online for my local tax office which, when phoned, comes up as no such number.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me if you have had a P800 tax calculation from the tax office for 2013/14 please. If so, let me know what figures are on it. If not, would you let me know what your income was in 2013/14 and how much tax was deducted. The figures for earnings will be on your P60. Were you in receipt of any taxable employment benefits such as membership of a private medical scheme?
Customer: replied 2 years ago.

P800 states

PAYE Income 25643

Medical Insurance Payments 584

Total 26227

Income after deductions 26227

Personal allowance 9440

Less total tax allowance 9440

Income tax is chargeable on this amount 16787

Tax on 16787 is;

Basic rate @ 20% on 16787 = 3357.40

Tax chargeable = 3357.40

Tax underpaid = 158.40

NB - I received medical insurance from April 2013 to January 2014 and paid tax at code 885 for those months. I changed jobs from February 2014 and did not get medical insurance so was informed tax code would be 994, which was the code used for February, but then in March 2014, they taxed me at code 885L.

Expert:  TonyTax replied 2 years ago.
Thanks.

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

Ok.

Customer: replied 2 years ago.

Feeling a bit in 'limbo' now as page has changed to 'open to all tax experts. Am I going to get a response to this today?

Expert:  TonyTax replied 2 years ago.
Hi again.

Had you stayed in the same job for the whole tax year, I would have expected a full year's medical benefit to be £701 (£584 / 10 x 12) and your tax code to be £873L (£9440 - £701).

The fact that you changed jobs and no longer had the medical benefit for the last two months of the 2013/14 tax year would not have meant that your tax code for those final two months should have been 944L. Your final personal allowance would have been £9440 - 10/12ths of the annual medical benefit which based on the figures you have given me would have left you with net allowances of £8856 (£9440- £584), code 885L. That code may have been operated on a Month 1 basis in March 2014 which means that it would have ignored what happened in the previous 11 months and for the position to be squared up after the end of the tax year which is what appears to have been done.

The error if there was one must have occurred earlier in the tax year. There are two ways you can deal with this:

1 Give me the gross pay and tax for each month of the 2013/14 tax year so that I can work out what the monthly tax deduction should have been or

2 Call the tax office on the number here (there are few local tax offices now) and ask them to tell you what tax codes were issued for 2013/14 by them and what was in them in terms of allowances and deductions, ie benefits. Ask them to confirm the medical benefit of £584 was as shown in the P11D sent to them by your former employer. Let me know what they say if you are still not convinced that the underpayment is correct.

The best time to get though to the tax office is early morning or just before they close. The only alternative is to write but you will wait for a long time for a reply.

I hope this helps but let me know if you have any further questions.
TonyTax and other Tax Specialists are ready to help you
Expert:  TonyTax replied 2 years ago.
Comprehensive answers take time I'm afraid.
Customer: replied 2 years ago.

So have I understood correctly, although my PAYE coding notice for 2013/14 states the medical benefit is £584, this figure may not be correct to what my employer told the tax office.

Expert:  TonyTax replied 2 years ago.

HMRC will normally base benefits for the next tax year's tax code on what the final figures were for the previous tax year in the absence of information to the contrary from the taxpayer (you) or the employer. The medical benefit that appears in your tax code will more often than not be an estimate.

At the end of the tax year, the employer completes a P11D for each employee who has had taxable employment benefits in the previous year and/or reimbursed expenses. At some stage during the next tax year, HMRC's computer will look a taxpayer's income and benefits for the tax year just ended and issue a P800 tax calculation if there is an underpayment of more than £10 or an overpayment of more than £10.

You should ask your former employer for a copy of your P11D which you are entitled to under the law. If the medical benefit in that is the same as the one HMRC have assessed which I suspect it will be as they get the benefits reported to them, then your P800 will probably be correct. Without looking at your payslips I cannot tell where the discrepancy arose but, given the fact that you changed jobs, it may have occurred towards the end of the tax year.