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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 40 years experience as a qualified accountant (UK based Practitioner)
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On my 2018/19 tax return there was £1612.15 income tax due,

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HiOn my 2018/19 tax return there was £1612.15 income tax due, which I chose the option for this to be collected via my tax code for 2020/21. I have just seen the adjustment to my tax free amount for 2020/21 and the deduction for “Underpayment from previous year” is £4,030, which is 2.5 times the income tax due figure. Is this correct and if so how is it worked out/why is it this figure? Thanks

Hello and welcome to JustAnswer. I am here to help you. I am reviewing your question and will respond to you shortly.
Many thanks

Thank you for your question.

A tax of £1,612.15 would equate to income of £4,030 taxed at 40%.

Please advise if you are a higher rate taxpayer?

My aim is to give you a professional service. I hope this is helpful and answers your question.
Please remember to rate my service by selecting the 5 stars at the top of the screen before you leave JA today. If you need more assistance, please use the reply box below and let me know. It has been my pleasure to assist you with your question.

Customer: replied 14 days ago.
Yes I am currently a higher rate tax payer. If my situation changes and I don’t reach the 40% tax threshold in 2020/21, will I just have to pay additional tax due when I do the tax return, or would I need to advise HMRC before then?
Customer: replied 14 days ago.
Many thanks for your first answer

Thank you for your reply.

If you don't reach 40% tax rate in the next tax year and your tax code does not change for 2020-21 then you would have paid all unpaid tax from previous year through PAYE system.

You will find out when you complete your tax return for 2019/20. You may need to contact HMRC once you have filed your tax return for year ended 5 Apr 2020.

I hope this is helpful and answers your question.

Customer: replied 14 days ago.
Thanks. Just to confirm your answer, you say I would have paid all unpaid tax even if I don’t reach the 40% threshold. Is that correct, or did you mean I would not have paid all unpaid tax?

Thank you fo ryour reply.

You said HMRC has amended your tax code for 2020-21 to recover underpaid tax for 2018-19.

Your tax code for current year has not been changed to recoup underpayment. So when you file your tax return for 2019-20 it will look at tax for the year and payments against it in the year through PAYE and not over/under payments relating to prior year.

It is possible you may have to pay additional tax at 31 Jan 2021 but it would cover tax year 2019-20 only as 2018-19 underpayment is take care of in 2020-21.

I hope this is helpful and answers your question.

Customer: replied 14 days ago.
Thanks, I understand but I’m saying I might not meet the 40% threshold in 2020/21 (I have already met it in 2019/20). Would that potentially lead to having to pay additional tax at 31 Jan 2022?

Thank you for your reply.

It may depending on how you wish underpayment in 2019-20 if any to be dealt with. If you decide to settle the underpayment for 2019-20 on 31 Jan 2021 then you should be alright for 31 Jan 2022.

I hope this is helpful and answers your question.
If there are no more issues, I will appreciate if you would kindly rate my service by selecting the 5 stars at the top of the screen before you leave, to ensure I get credited for it by Just Answer today.

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Customer: replied 14 days ago.
Thank you, will do

I thank you for accepting my answer.

Best wishes.