Have Tax Questions? Ask a Tax Expert for Answers ASAP
Do you complete a self-assessment tax return? Are the £20,000 expenses reimbursed to you by your employer? Do you receive a P11D after the end of the tax year? What is your current tax code?
Leave this with me while I draft my answer.
If the expenses were not reimbursed to you by your employer, your taxable income would be lower to effect tax relief for those expenses and you would retain more of your personal allowance. However, nobody is gong to work for an employer who won't reimburse legitimate business expenses, especially if they are as high as £20,000 per annum since the maximum tax relief that can be obtained is 45%. That would leave you paying the other 55% personally.
Your tax code should include a contra entry to the business expenses as they are reimbursed to you so that in effect you are not out of pocket. If there isn't a contra entry in your tax code, you will almost certainly be underpaid at the end of any one tax year as you will be claiming tax relief for something that ultimately you didn't pay yourself.
I hope this helps but let me know if you have any further questions.
Yes and no.
If your tax code is 2000, for example, and you have no personal allowance you are getting tax relief of £8,000 on £20,000 of expenses which would be fine if you were not reimbursed those expenses by your employer. As you are reimbursed, the pay out of those expenses by you and the reimbursement to you effectively net one another off so when you complete your tax return at the end of the tax year, you will be underpaid by £8,000. You appear to be on a Month 1 code right now as well (M1).
You need to know what makes up your tax code. If you don't have it to hand, call HMRC on the number here and ask them to tell you what is in your tax code in terms of allowances and deductions. Also, ask if the code can be changed from a Month 1 code to a cumulative code. I will be happy to assess the position further if you can let me have the code detail.
If there is no contra entry for the job expenses in your tax code, then when you complete your tax return you will be underpaid. Would you let me have your P60 figures for 2015/16 so I can calculate your tax position?
If I use those figures as your total pay and tax for the year, you will be underpaid by £7,469. Your personal alloowance is too high and there is no contra entry for reimbursed expenses. Your current employer should have the tax year end totals which will include the figures you just gave me.
The year end gross pay figure on the P45 is lower than the previous job figure as is the tax figure. The new figures show you underpaid by £4772.
You should get a P60 from your current employer. The last payslip before 6 April 2016 will have the tax year end figures for 2015/16.
For 2014/15, assuming you made no pension contributions other than through your payslip, your tax should have been £34,932.20. You paid £27536.20 so you would appear to be underpaid by £7,396.00.
You have a P45 dated 31/1/16 with gross pay of £117,330 and tax of £32,331.70. This conflicts with the figures of £65,545.92 and £19,749.80. Is the £65,545.92 just from your new job, ie in addition to the £117,330 from your old job?
What do the PEN 1 EE and PEN 1ER figures represent?
Are you saying that you earned £117,330 to December 2015 in your old job and £65,545 from November 2015 to the end of March 2016 in your new job? If so, your total earnings in 2015/16 were £182,875. Tax on that would be £68,436.75 and you had £52,081.50 deducted at source so the underpayment is around £16,355.75. The reference to PEN 1 EE is employee pension contribution and the reference to PEN 1 ER is employer pension contribution.
Total Income £182,875. No personal allowance. Tax on £31,785 @ 20% (£6,357.00), on 118,215 @ 40% (£47,286.00) and on £32,875 @ 45% (14,793.75). Total tax due £68,436.75. Tax deducted at source £52,081.50. Tax underpayment £16,355.75. Pension contributions may affect the bot***** *****ne if tax relief wasn't given at source.
As I said earlier, your tax was wrong, hence the underpayment.
You had allowances you weren't entitled to namely the personal allowance and the expenses allowance, hence the underpayment.
Call the tax office and have your current tax code reviewed and changed if necessary based on your current salary. As expenses are reimbursed, they should either be excluded from the tax code or cancelled out by a contra entry. It should probably be OT.
We are only in the second month of the tax year so if you had the code amended to a cumulative code, it would effectively take some extra tax for April 2016 in the May payroll run if that hasn't been done already. Alternatively, the underpayment for April 2016 and possibly May 2016 can be left until the end of the year and paid through your self-assessment by HMRC issuing a Month 1 code which ignores what has gone before in the current tax year.
Hi.I'm just following up to find out if my answer helped or if you have any further questions.
What type of expenses are you referring to?
If I were you. I'd claim them through the employment pages of your tax return and point out in the white space that they should have been reimbursed to you by your employer but were not. HMRC may ask questions so keep the expense details.
If the expenses are T&S , then yes, box 17 is the one to use.