PAYE and self assessment not matching up
Discussion
A friend has asked for some help after running into an issue with her self assessment return.
Her situation is quite simple - £135k PAYE and no other declarable income.
All seemed straightforward until we got to the final calculation which suggests she still owes ~£5k.
The only thing I can think of is that the PAYE system doesn't take into account the loss of the personal allowance once you earn over 100k. This seems fairly ridiculous but I can't see why else the calculations would be so far out.
Any experience?
Her situation is quite simple - £135k PAYE and no other declarable income.
All seemed straightforward until we got to the final calculation which suggests she still owes ~£5k.
The only thing I can think of is that the PAYE system doesn't take into account the loss of the personal allowance once you earn over 100k. This seems fairly ridiculous but I can't see why else the calculations would be so far out.
Any experience?
Its not that unusual.
Often because the tax code was wrong and not taking account of the loss of the allowance.
Can happen if the pay is lumpy or it’s a jump from the previous year. Eg bonus or stock that ends up on the p60 but wasn’t landing every month.
It pays to inform hmrc (by entering a guess as to what you think you’ll get paid each year on the website) to get a more accurate tax code.
(In the same boat here as are several of my colleagues- just have to pay the man and not cry too much)
Often because the tax code was wrong and not taking account of the loss of the allowance.
Can happen if the pay is lumpy or it’s a jump from the previous year. Eg bonus or stock that ends up on the p60 but wasn’t landing every month.
It pays to inform hmrc (by entering a guess as to what you think you’ll get paid each year on the website) to get a more accurate tax code.
(In the same boat here as are several of my colleagues- just have to pay the man and not cry too much)
If she didn't earn over £100k in the previous year, the HMRC would not know to remove her personal allowance in the current year (unless she called them to tell them). They would have left her on the stand tax code 1257L.
The PA reduces by £1 for every £2 over £100k so the HMRC would need to know what her earning were at the end of the year to see how much PA was lost.
Personal allowance £12,570 at 40% = £5,100
Next year will be fine as the HMRC will assume that she will earn over £125k again and have no PA.
The PA reduces by £1 for every £2 over £100k so the HMRC would need to know what her earning were at the end of the year to see how much PA was lost.
Personal allowance £12,570 at 40% = £5,100
Next year will be fine as the HMRC will assume that she will earn over £125k again and have no PA.
She's had a free loan of £5K from the taxman!
I don't know - I was going to say that someone should realise their tax is £500/mth light but, kids these days! Wonder if she would have noticed if it was £500 too much?
Does seeing a tax advisor on Monday leave enough time to submit and pay?
I don't know - I was going to say that someone should realise their tax is £500/mth light but, kids these days! Wonder if she would have noticed if it was £500 too much?
Does seeing a tax advisor on Monday leave enough time to submit and pay?
Eric Mc said:
If your salary is £135,000, by default your tax affairs will NOT be simple.
Which is a rather ridiculous state of affairs. I don't see why someone earning £135k on PAYE should be any more complicated than someone earning £30k. Especially when their earnings throughout the year are consistent with no unexpected bonus etc. As GR86 suggests, the figures do match up with them not taking into account the loss of the personal allowance.
It hopefully won't be a problem next year anyway as she plans to dump a load into her pension to avoid the equally ridiculous 61.5% marginal rate.
Edited by Snow and Rocks on Friday 27th January 17:37
anyone doing SA needs to be logging on to their HMRC personal account and submitting their estimated earnings at the START of the tax year. Include your bonus, deduct your pension and other salary sacrifice, etc. If your pay is unevenly distributed throughout the year, then you'll likely be underpaying. HMRC will almost always mess up the earnings estimate even if you stay in the same job earning the same money, let alone dare to change jobs or have a break etc. It's basically your responsibility to estimate your earnings sensibly and almost no one does it.
Inexplicably despite having done a number without issue. I was written to to say I’d input different numbers to what HMRC had been sent by my employer - went from £7k rebate to owing them 2 grand 
No idea what’s happened. I put in an exact figure as per what was shown in the portal and it was £20k out vs what the inspector had. Odd
No idea what’s happened. I put in an exact figure as per what was shown in the portal and it was £20k out vs what the inspector had. Odd
Blown2CV said:
anyone doing SA needs to be logging on to their HMRC personal account and submitting their estimated earnings at the START of the tax year. Include your bonus, deduct your pension and other salary sacrifice, etc. If your pay is unevenly distributed throughout the year, then you'll likely be underpaying. HMRC will almost always mess up the earnings estimate even if you stay in the same job earning the same money, let alone dare to change jobs or have a break etc. It's basically your responsibility to estimate your earnings sensibly and almost no one does it.
Where does one enter the estimated earnings? I've been hit withjbexoected tax also so am keen to follow this route next year if it will help. FishAndChips said:
Blown2CV said:
anyone doing SA needs to be logging on to their HMRC personal account and submitting their estimated earnings at the START of the tax year. Include your bonus, deduct your pension and other salary sacrifice, etc. If your pay is unevenly distributed throughout the year, then you'll likely be underpaying. HMRC will almost always mess up the earnings estimate even if you stay in the same job earning the same money, let alone dare to change jobs or have a break etc. It's basically your responsibility to estimate your earnings sensibly and almost no one does it.
Where does one enter the estimated earnings? I've been hit withjbexoected tax also so am keen to follow this route next year if it will help. it won't make you pay more or less tax in the long run, but it will stop HMRC being as 'surprised' when you do your SA and then declaring you massively underpaid.
Blown2CV said:
anyone doing SA needs to be logging on to their HMRC personal account and submitting their estimated earnings at the START of the tax year. Include your bonus, deduct your pension and other salary sacrifice, etc. If your pay is unevenly distributed throughout the year, then you'll likely be underpaying. HMRC will almost always mess up the earnings estimate even if you stay in the same job earning the same money, let alone dare to change jobs or have a break etc. It's basically your responsibility to estimate your earnings sensibly and almost no one does it.
^this x100.It’s so important to give them an accurate indication of your expected income to get a semi accurate tax code. This can be updated in seconds via the HMRC app as the year progresses if you’re doing better or worse than you originally thought. Saves any unexpected surprises come SA time.
Snow and Rocks said:
A friend has asked for some help after running into an issue with her self assessment return.
Her situation is quite simple - £135k PAYE and no other declarable income.
All seemed straightforward until we got to the final calculation which suggests she still owes ~£5k.
The only thing I can think of is that the PAYE system doesn't take into account the loss of the personal allowance once you earn over 100k. This seems fairly ridiculous but I can't see why else the calculations would be so far out.
Any experience?
Does she have a DB pension?Her situation is quite simple - £135k PAYE and no other declarable income.
All seemed straightforward until we got to the final calculation which suggests she still owes ~£5k.
The only thing I can think of is that the PAYE system doesn't take into account the loss of the personal allowance once you earn over 100k. This seems fairly ridiculous but I can't see why else the calculations would be so far out.
Any experience?
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