Help me make sense on my income tax

[dannnd]

Hoping someone can help me make sense of my income tax for the 2023/24 year if possible as HMRC are stating that I have underpaid.

I changed jobs in August 2023, and handed in my P45 to the new employer. This meant that my year to date tax paid figure on my October 2023 (the first payment from the new employer) correctly included my previous earnings and income tax. Happy days.

Now, come March 2024 and what appears to have happened is my new employer has calculated my earnings for the year, and excluded my previous employment - meaning that I had negative income tax (i.e. a refund).

HMRC are now effectively saying that I have underpaid by the amount that was paid over by my previous employment and want to collect it over the next tax year.

I can't understand why that would have happened - is it an error from my new employer or am I missing something?

Thanks!

[Countdown]

dannnd said:

Hoping someone can help me make sense of my income tax for the 2023/24 year if possible as HMRC are stating that I have underpaid.

I changed jobs in August 2023, and handed in my P45 to the new employer. This meant that my year to date tax paid figure on my October 2023 (the first payment from the new employer) correctly included my previous earnings and income tax. Happy days.

Now, come March 2024 and what appears to have happened is my new employer has calculated my earnings for the year, and excluded my previous employment - meaning that I had negative income tax (i.e. a refund).

HMRC are now effectively saying that I have underpaid by the amount that was paid over by my previous employment and want to collect it over the next tax year.

I can't understand why that would have happened - is it an error from my new employer or am I missing something?

Thanks!

Do you know what tax code was shown on your October payslip?

As long as you've got your P45 figures and your P60 figures it should be fairly easy to check.

[dannnd]

My tax code has stayed the same throughout the year 1257L and this shows on my August payslip at the old employer and the October one at the new employer.

Cheers!

[Countdown]

is your pay fixed or does it fluctuate? i.e. do you get ad-hoc bonuses, overtime, that kind of thing ?

[dannnd]

Thanks for the help!

I got a bonus in the March payslip (the month when I also had the negative tax adjustment) but otherwise no other quirks (overtime etc).

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dannnd said:

Thanks for the help!

I got a bonus in the March payslip (the month when I also had the negative tax adjustment) but otherwise no other quirks (overtime etc).

Lump sum payments in March tend to confuse payroll systems (normally when an ad-hoc payment goes through your tax spikes but then corrects itself over the following couple of months). As March is the last month of the tax year if there are any anomalies there's no time left to correct this.

What I would suggest is taking the YTD figures from your March payslip and punching them into something like https://listentotaxman.com/ and see what figures it churns out. It should tell you how much tax you should have paid for the year. Compare this to the actual tax you paid and that should tell you if HMRC are right or not.

Alternatively, if they're chasing you for tax they should have sent you a breakdown of things like gross taxable pay, tax payable, tax deducted, tax still to pay. You could compare these figures to your March payslip?

[dannnd]

Thanks again. I get what you’re saying. I’ve recalculated my tax just using my YtD income figures and it is agreeing back to HMRC’s calculation (unfortunately).

The difference is entirely the amount from my previous employment which equals the negative adjustment in my March payslip. I just can’t work out why they would have reversed that.

[Sheepshanks]

I'm not saying I'd have said anything, but did you not think it was pretty odd that you got a bonus AND a tax rebate at the same time?

[dannnd]

Of course I thought it was a strange but happy series of events, but given I have queried it with my employer now and they are saying they believe the calculation is correct - I can’t imagine it would have changed the scenario I am in at the moment if I had said something at the time.

Regardless, I’m just trying to work out why it has happened and whether it is something I have done etc.

[Countdown]

It sometimes happens when a new employee doesnt provide a P45 and ticks the wrong box on the New Starter Checklist. This results in them underpaying tax until HMRC catch up (collate the tax details from their previous employment and combine with their current employment)

As you provided a P45 this obviously isnt the situation in your case.

[Sheepshanks]

dannnd said:

Of course I thought it was a strange but happy series of events, but given I have queried it with my employer now and they are saying they believe the calculation is correct - I can’t imagine it would have changed the scenario I am in at the moment if I had said something at the time.

Regardless, I’m just trying to work out why it has happened and whether it is something I have done etc.

No, sure - but if you knew (or strongly suspected) it was wrong, you could have kept the money aside.

If you previous employment taxable pay and tax paid was included in earlier payslips, did they disappear from the March payslip?

I don't know how payroll systems work but sounds like someone messed up. There was a thread the other day from someone who hasn't paid NI contributions for some years and turned out his firm had put him their payroll system as over retirement age.

[dannnd]

Thanks. Fortunately the money did go aside so once I’ve understood what caused the error I will pay my dues. I only mentioned the collecting over the year as that is what the P800 from HMRC said.

You’re correct - the year to date figures were correct in February (and included my previous employment) and then disappeared in March.

[MustangGT]

Countdown said:

It sometimes happens when a new employee doesnt provide a P45 and ticks the wrong box on the New Starter Checklist. This results in them underpaying tax until HMRC catch up (collate the tax details from their previous employment and combine with their current employment)

As you provided a P45 this obviously isnt the situation in your case.

Agreed. It could also be the payroll team input the wrong value for the year-to-date, however, also seems unlikely in this case.

Simple test - look at your monthly payslips for each month, is the deduction roughly the same each month. When you changed jobs is the tax deducted still in line with expectations considering any change in salary?

[Sheepshanks]

MustangGT said:

Simple test - look at your monthly payslips for each month, is the deduction roughly the same each month. When you changed jobs is the tax deducted still in line with expectations considering any change in salary?

dannnd said:

You’re correct - the year to date figures were correct in February (and included my previous employment) and then disappeared in March.

[MustangGT]

Sheepshanks said:

MustangGT said:

Simple test - look at your monthly payslips for each month, is the deduction roughly the same each month. When you changed jobs is the tax deducted still in line with expectations considering any change in salary?

dannnd said:

You’re correct - the year to date figures were correct in February (and included my previous employment) and then disappeared in March.

No ytd figures in March only would indicate an error in payroll, not much else could explain that.

[ChocolateFrog]

dannnd said:

Of course I thought it was a strange but happy series of events but given I have queried it with my employer now and they are saying they believe the calculation is correct - I can’t imagine it would have changed the scenario I am in at the moment if I had said something at the time.

Regardless, I’m just trying to work out why it has happened and whether it is something I have done etc.

Sorry but I couldn't help but chuckle at that.

That was clearly wrong and they were not just going to forget about it.

[MustangGT]

If you look at your March payslip, what values are showing in terms of cumulative figures for tax and salary, plus what tax code is shown, and does it state W1M1 anywhere?