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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3360
Experience:  FCCA FCMA CGMA ACIS
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I am a pensioner who is still working ( company) & started

Customer Question

I am a pensioner who is still working (for a company) & started to collect my government pension in April. I have just received new tax codes in the middle of August & today I have received a P800 saying I have underpaid by £884.20? I am on PAYE & my total earnings with pensions will be around 42K, I believe I am paying too much tax. Help!!!
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Firstly, tax codes; these are designed to make you tax neutral at the end of each tax year and if correct are very successful. HMRC's normal procedure is to apply your tax code to your Government pension and issue appropriate codes to your employers. However, this is where things can go wrong as they may well be running PAYE through different tax offices so there is a distinct possibility that one of the other will issue an incorrect coding (often giving you another personal allowance by default) thus leaving you owing moneys at the year end or alternatively having over paid tax. You have now received a P800 saying that you have underpaid for the year. The first thing to do is to check that the tax office which issued it has the figures ie what you earned and the tax deducted correct. You can check this data from the P60s issued by the paying organisations. If these are correct then you do owe the nearly 900 quid stated which must be paid by 31 January 2016. If they are wrong then you appeal against the assessment simply by writing a letter to HMRC pointing out the errors and asking for the P800 to be amended. You should also check any tax code issued on each and every occasion these are notified and if they are incorrect take it up with HMRC and have them amended. If you do this then you will much reduce any year end nasty surprises. With an income of 42K you will be borderline for a small proportion of your emoluments being in the 40% tax bracket. .I do hope than my reply has been of assistance. A little leg work is needed here, I regret.
Customer: replied 1 year ago.

Hi Keith,

I have an employer tax code of K263 & two minute private pension tax codes of DO. How can I be paying 40% tax on these pensions if my yearly income is just over 42K? I am also paying between £550/600 a month tax on my salary of around £2500 gross.

Regards

Alan

Expert:  bigduckontax replied 1 year ago.
Alan
Simply because these tax codes are incorrect. Higher rate tax kicks in at an income level of 31865. Add your personal allowance of 10600 gives an income of 42465 before the higher rate at 40% strikes. The monthly deductions you are suffering are, in fact, not that far out for an income at that level.
This is how the K codes work [source Gov UK web site]:
'Tax codes with ‘K’ at the beginning mean you have income that isn’t being taxed another way and it’s worth more than your tax-free allowance. For most people, this happens when you’re:
Paying tax you owe from a previous year through your wages or pension
Getting State benefits that you need to pay tax on (like the State Pension)
Getting benefits from work that you must pay tax on (like a company car or health insurance)
Your employer or pension provider takes the tax due on the income that hasn’t been taxed from your wages or pension - even if another organisation is paying the untaxed income to you.'
I regret that in your position you have to keep a beady eye upon what all your payers are using as tax codes and get HMRC to alter them if they are incorrect. HMRC have got my initial tax code wrong these last 20 years and only got it right, well nearly, this year. You could have knocked me down with a feather!
Regards
Keith
Customer: replied 1 year ago.

Hi Keith,

I thank you for your answers, I think I will just put up & shut up. My biggest gripe is why has the tax system got to be so complicated. They send me all these figures but who am I to question them? I think my next move is to speak to the tax advisors of Starbucks Coffee & Amazon (just joking & no disrespect intended)

Kind regards

Alan

Expert:  bigduckontax replied 1 year ago.

It's merely a question of checking tax codes when you are in your position, Alan, a terrible bore I know, but why pay more tax than you need? Of course, if HMRC require to self assess it will all come out in the wash anyway and either a bill sent or a refund made.

Please be so kind as to rate me before you leave the Just Answer site.

Regards, Keith.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3360
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support, Alan.

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