Tax demand/rebate fiasco
Discussion
Yes they are.
The amounts most commonly seen being demanded are between £1,200 and £1,300 and that is not a coincidence.
The reason these errors have occured is because people have been allocated two sets of personal tax allowances instead of one. This has happened mainly with individuals who had two or more sources of PAYE income in a given tax year - such as two employments or a pension and an employment. In other words, both of the PAYE payers have applied a full personal tax allowance in error against the income they are paying .
What should have happened was that one source of PAYE income (usually the larger of the two) should have operated the full tax allowance against that income and the other source of PAYE income should have deducted tax in full at the basic rate i.e. 20%.
The personal tax allowance for 2008/09 was £6.035. If a person got the erroneous benefit of two of these allowances, then they have underpaid tax for that year by £1,207 (£6,035 x 20%)
The personal tax allowance for 2009/10 was £6.475. If a person got the erroneous benefit of two of these allowances, then they have underpaid tax for that year by £1,295 (£6,475 x 20%)
HMRC plan to go back six years with these cases so beware - there is more pain in the offing for a lot of unexpectant taxpayers.
The amounts most commonly seen being demanded are between £1,200 and £1,300 and that is not a coincidence.
The reason these errors have occured is because people have been allocated two sets of personal tax allowances instead of one. This has happened mainly with individuals who had two or more sources of PAYE income in a given tax year - such as two employments or a pension and an employment. In other words, both of the PAYE payers have applied a full personal tax allowance in error against the income they are paying .
What should have happened was that one source of PAYE income (usually the larger of the two) should have operated the full tax allowance against that income and the other source of PAYE income should have deducted tax in full at the basic rate i.e. 20%.
The personal tax allowance for 2008/09 was £6.035. If a person got the erroneous benefit of two of these allowances, then they have underpaid tax for that year by £1,207 (£6,035 x 20%)
The personal tax allowance for 2009/10 was £6.475. If a person got the erroneous benefit of two of these allowances, then they have underpaid tax for that year by £1,295 (£6,475 x 20%)
HMRC plan to go back six years with these cases so beware - there is more pain in the offing for a lot of unexpectant taxpayers.
Edited by Eric Mc on Tuesday 9th November 17:23
Eric Mc said:
Yes they are.
The amounts most commonly seen being demanded are between £1,200 and £1,300 and that is not a coincidence.
The reason these errors have occured is because people have been allocated two sets of personal tax allowances instead of one. This has happened mainly with individuals who had two or more sources of PAYE income in a given tax year - such as two employments or a pension and an employment. In other words, both of the PAYE payers have applied a full personal tax allowance in error against the income they are paying .
What should have happened was that one source of PAYE income (usually the larger of the two) should have operated the full tax allowance against that income and the other source of PAYE income should have deducted tax in full at the basic rate i.e. 20%.
This is exactly the scenario I found myself in a couple of years ago, I'm glad I do self assessments (despite the majority of my income being PAYE) as it picked this up at the time.The amounts most commonly seen being demanded are between £1,200 and £1,300 and that is not a coincidence.
The reason these errors have occured is because people have been allocated two sets of personal tax allowances instead of one. This has happened mainly with individuals who had two or more sources of PAYE income in a given tax year - such as two employments or a pension and an employment. In other words, both of the PAYE payers have applied a full personal tax allowance in error against the income they are paying .
What should have happened was that one source of PAYE income (usually the larger of the two) should have operated the full tax allowance against that income and the other source of PAYE income should have deducted tax in full at the basic rate i.e. 20%.
I think far more people curently on PAYE should do Self Assessment tax returns. Although it's a bit of a hassle, at least they would get to review their tax situation for the year and would prevent dangerous errors building up over time. The UK tax system is weird in that of the 40 million taxpayers in the country, only 9 million are expected to complete tax returns.
Hi All
When I was made redundant at my long-term (35 years)I received a pension. I then got another job. I realized that I had been issued 2 tax allowances. I phoned the tax office and had my allowance put on my income from my job (no tax allowance on the pension).
What i didn’t think off was I was sneaking into a higher tax band with the two incomes. This was 5 years ago and by my reckoning i could be 12 grand into the red with the taxman.
Will the fact I reported 5 years ago have any weight with the taxman, I certainly haven’t got 12k to payback.
When I was made redundant at my long-term (35 years)I received a pension. I then got another job. I realized that I had been issued 2 tax allowances. I phoned the tax office and had my allowance put on my income from my job (no tax allowance on the pension).
What i didn’t think off was I was sneaking into a higher tax band with the two incomes. This was 5 years ago and by my reckoning i could be 12 grand into the red with the taxman.
Will the fact I reported 5 years ago have any weight with the taxman, I certainly haven’t got 12k to payback.
Texpis said:
Hi All
When I was made redundant at my long-term (35 years)I received a pension. I then got another job. I realized that I had been issued 2 tax allowances. I phoned the tax office and had my allowance put on my income from my job (no tax allowance on the pension).
What i didn’t think off was I was sneaking into a higher tax band with the two incomes. This was 5 years ago and by my reckoning i could be 12 grand into the red with the taxman.
Will the fact I reported 5 years ago have any weight with the taxman, I certainly haven’t got 12k to payback.
No.When I was made redundant at my long-term (35 years)I received a pension. I then got another job. I realized that I had been issued 2 tax allowances. I phoned the tax office and had my allowance put on my income from my job (no tax allowance on the pension).
What i didn’t think off was I was sneaking into a higher tax band with the two incomes. This was 5 years ago and by my reckoning i could be 12 grand into the red with the taxman.
Will the fact I reported 5 years ago have any weight with the taxman, I certainly haven’t got 12k to payback.
Expect a letter any day now.
Eric Mc said:
Texpis said:
Hi All
When I was made redundant at my long-term (35 years)I received a pension. I then got another job. I realized that I had been issued 2 tax allowances. I phoned the tax office and had my allowance put on my income from my job (no tax allowance on the pension).
What i didn’t think off was I was sneaking into a higher tax band with the two incomes. This was 5 years ago and by my reckoning i could be 12 grand into the red with the taxman.
Will the fact I reported 5 years ago have any weight with the taxman, I certainly haven’t got 12k to payback.
No.When I was made redundant at my long-term (35 years)I received a pension. I then got another job. I realized that I had been issued 2 tax allowances. I phoned the tax office and had my allowance put on my income from my job (no tax allowance on the pension).
What i didn’t think off was I was sneaking into a higher tax band with the two incomes. This was 5 years ago and by my reckoning i could be 12 grand into the red with the taxman.
Will the fact I reported 5 years ago have any weight with the taxman, I certainly haven’t got 12k to payback.
Expect a letter any day now.
t.CWH said:
I got the little brown envelope a few weeks back.
I owe £450 which will be taken from 2011 in monthly installments.
I believe anything over £2000 has to be paid in a lump sum correct me if I'm wrong.
Correct.I owe £450 which will be taken from 2011 in monthly installments.
I believe anything over £2000 has to be paid in a lump sum correct me if I'm wrong.
This because the figure is too big to be collected through PAYE Coding adjustments. If the liability was over that amount and it was impossible to pay it all up front, I would try and negotiate with them so that they collect some through a Coding Adjustment and the balance by direct patment.
Eric Mc said:
Correct.
This because the figure is too big to be collected through PAYE Coding adjustments. If the liability was over that amount and it was impossible to pay it all up front, I would try and negotiate with them so that they collect some through a Coding Adjustment and the balance by direct patment.
Eric thanks for the info so far, specific question for my situation I owe just (or my previous employer TBD) over the limit, if it ends up in my lap.This because the figure is too big to be collected through PAYE Coding adjustments. If the liability was over that amount and it was impossible to pay it all up front, I would try and negotiate with them so that they collect some through a Coding Adjustment and the balance by direct patment.
Can I pay a lump sum to get it down to £2,000?
Then over how long a period can I spread the remaining £2,000?
Buy paying through an adjusted pay code are you paying gross? and by paying a direct lump sum then wouldn't it be net? so it would be a major disadvantage to pay any lump sum or do they adjust the lump sum to a net amount, no?
Edited by OneDs on Wednesday 10th November 09:10
OneDs said:
Eric Mc said:
Correct.
This because the figure is too big to be collected through PAYE Coding adjustments. If the liability was over that amount and it was impossible to pay it all up front, I would try and negotiate with them so that they collect some through a Coding Adjustment and the balance by direct patment.
Eric thanks for the info so far, specific question for my situation I owe just (or my previous employer TBD) over the limit, if it ends up in my lap.This because the figure is too big to be collected through PAYE Coding adjustments. If the liability was over that amount and it was impossible to pay it all up front, I would try and negotiate with them so that they collect some through a Coding Adjustment and the balance by direct patment.
Can I pay a lump sum to get it down to £2,000?
Then over how long a period can I spread the remaining £2,000?
Buy paying through an adjusted pay code are you paying gross? and by paying a direct lump sum then wouldn't it be net? so it would be a major disadvantage to pay any lump sum or do they adjust the lump sum to a net amount, no?
Edited by OneDs on Wednesday 10th November 09:10
A recovery through a coding adjustment will affect your take home pay. The coding will be increased for a given tax year so that your weekly or monthly PAYE will contain two elements, that related to your normal current year tax and that relating to the arrears being collected in respect of the earlier tax year. Coding adjustments can be very complicated and difficult to understand, especially if the taxpayer pays tax in the CURRENT year at 40% and the arrears relate to an earler year when he was paying tax at 20% only.
PAYE can be a VERY messy tax collection system.
OneDs said:
Thanks... here's hoping the previous employer pays it! although I doubt it.
I doubt it too. If they were operating on HMRC PAYE Coding instruction, which they are legally obliged to do, then they have no culpability in the matter. Ultimately, taxpayers, even those under PAYE, should never assume that the PAYE system is calculating everything correctly. People should be aware of what their personal tax allowances are and how those allowances are operated through the PAYE system. They don't need to be tax gurus but the fact that more than one of your PAYE sources (employments, pensions etc) seems to be operating full tax alllowances should set off alarm bells immediately.
Far too many PAYE employeees have been far too complacent about their tax affairs and have not been not aware of their own responsibility in this department.
Edited by Eric Mc on Wednesday 10th November 09:48
Eric Mc said:
OneDs said:
Thanks... here's hoping the previous employer pays it! although I doubt it.
I doubt it too. If they were operating on HMRC PAYE Coding instruction, which they are legally obliged to do, then they have no culpability in the matter. Ultimately, taxpayers, even those under PAYE, should never assume that the PAYE system is calculating everything correctly. People should be aware of what their personal tax allowances are and how those allowances are operated through the PAYE system. They don't need to be tax gurus but the fact that more than one of your PAYE sources (employments, pensions etc) seems to be operating full tax allowances should set off alarm bells immediately.
Far too many PAYE employees have been far too complacent about their tax affairs and have not been not aware of their own responsibility in this department.
Edited by Eric Mc on Wednesday 10th November 09:48
I don't accept that PAYEr's should be fully aware of the tax rules and regs as well as 100% culpable, many many self-employed people I know are equally if not more ignorant of their requirements, but have the capability to pay a professional to complete their returns, if the accountant got it wrong they be in for a whack as well or would simply lose the business, or at worse go to prison/fined. PAYEr's have no ability to switch there tax affairs to different provider or define how their Employers apply the tax rules unless they personally find an error. So in order to ensure it's right your saying they should also complete a return themselves or pay an accountant to do it, in which case that is just duplicating effort. I don't earn huge money, I no longer have a significant amount of investments (outside of a pension) so I see no need as to why I should employ someone or myself spend time completing a self assessment when my employer should be capable and responsible enough to do right, in fact even if they did my opinion means nothing as effectively the HRMC set the rules and manage the process... badly!
The system is badly flawed in many areas. I have had grave misgivings about the ability of PAYE to tax people properly for many years and these current revelations are proving that those misgivings were correct.
As I said earlier, the system here works on the basis that only 23% of taxpayers submit tax returns. That means that 77% of taxpayers never get to review their overall tax position on a regular basis. This is not the situation in other countries. In the US, for instance, a much, much higher percentage of individuals complete tax returns.
For those who's income is mainly PAYE derived, I do not think that the assistance of a professional would be necessary. With on-line filing, a PAYE person could submit their return in a fairly straightforward way and the system would do all the calculating for you. I would like to think that the upshot of the current PAYE problems is that more people will start filing their own tax returns on-line.
Those who I think should think seriously about this are -
those who have more than one PAYE employment
pensioners (no matter what their levels of income are)
those who's income levels take them into the higher rate tax brackets
As I said earlier, the system here works on the basis that only 23% of taxpayers submit tax returns. That means that 77% of taxpayers never get to review their overall tax position on a regular basis. This is not the situation in other countries. In the US, for instance, a much, much higher percentage of individuals complete tax returns.
For those who's income is mainly PAYE derived, I do not think that the assistance of a professional would be necessary. With on-line filing, a PAYE person could submit their return in a fairly straightforward way and the system would do all the calculating for you. I would like to think that the upshot of the current PAYE problems is that more people will start filing their own tax returns on-line.
Those who I think should think seriously about this are -
those who have more than one PAYE employment
pensioners (no matter what their levels of income are)
those who's income levels take them into the higher rate tax brackets
Edited by Eric Mc on Wednesday 10th November 10:52
HMRC knew for many, many years that there were serious problems with the PAYE system. They did nothing about it because the general consensus within HMRC and The Treasury was that the overpayments and the underpayments were more or less equal. Therefore they assumed that the Exchequer was not losing out.
The upgrading of the PAYE computer system has revealed that this was not the case at all. Most of the errors have been revealed to be underpayments - because of the fact that, in some cases, people have been issued with more than one tax allowance in certain tax years. They have therefore paid too little PAYE.
The upgrading of the PAYE computer system has revealed that this was not the case at all. Most of the errors have been revealed to be underpayments - because of the fact that, in some cases, people have been issued with more than one tax allowance in certain tax years. They have therefore paid too little PAYE.
my sister received a letter for 2008 - 2009 tax year saying she owes £849 and for 2009 - 2010 owing £2423, shes really pissed off. She has two small part time jobs where she earns in total just under 10k and will struggle to pay it off.
She can not go get a full time job, as she is also studying for a degree, but part time, and is working voluntary to gain experience as she will not be able to get a job easily after or join the professional organisations, nor would she be willing to bin it all. It makes her angry even more, as she informed the second job that it was in fact a second job, and she rang the HMRC to also inform them. When this all came to light in the media, she rang the HMRC...where one idiot even told her, from the sounds of things you could even get a rebate! absolutely livid! especially when that tt in parliament says the British person has never had it so good.
She can not go get a full time job, as she is also studying for a degree, but part time, and is working voluntary to gain experience as she will not be able to get a job easily after or join the professional organisations, nor would she be willing to bin it all. It makes her angry even more, as she informed the second job that it was in fact a second job, and she rang the HMRC to also inform them. When this all came to light in the media, she rang the HMRC...where one idiot even told her, from the sounds of things you could even get a rebate! absolutely livid! especially when that t
t in parliament says the British person has never had it so good.She was probably having it too good in that she was getting two or more sets of full personal tax allowances and didn't realise it. That is the main reason why these discrepancies have occured and the people involved are generally those who have had two or more sources of PAYE in the relevant tax years. Ironically, those who have been completing Self Assessment tax returns will not experience these demands as they are pretty much on top of their own tax situation. It's now payback time - unfortunately.
One thing, check that the £2,423 you have quoted for 2009/10 isn't inclusive of the 2008/09 amount.
I was checking one of these demands recently and the client thought they owed £4,000. What she didnt realise was that the total shown on the bottom of the 2009/10 calculation was, in fact, a COMBINED amount showing both the 2008/09 AND the 2009/10 tax amounts due ADDED TOGETHER.
She actually owed £2,500 - still painful but not as bad as first thought.
One thing, check that the £2,423 you have quoted for 2009/10 isn't inclusive of the 2008/09 amount.
I was checking one of these demands recently and the client thought they owed £4,000. What she didnt realise was that the total shown on the bottom of the 2009/10 calculation was, in fact, a COMBINED amount showing both the 2008/09 AND the 2009/10 tax amounts due ADDED TOGETHER.
She actually owed £2,500 - still painful but not as bad as first thought.
Edited by Eric Mc on Sunday 21st November 11:24
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