K income tax code

Yes, but not on all of it.

Well yes, that's the idea. You should pay more tax next year than you would have done if your next year's code were the normal 522L. If the result is that you pay £2200 more tax, then you'll end up even.

Well they've worked out my tax code by reducing my allowance by 10000 (22% of 10000 is 2200). However, if I am paying some of that tax back at 40% then I'll be paying back 2200 extra and some more as well?

Tim

Perhaps they thought that whatever error led to you owing them £2200 is continuing, and they're trying to pre-compensate for that.

I'm not sure exactly how the K codes work. It's probably that £4640 is added onto your income and your personal allowance deleted, so you'd be taxed as though you were earning £39640. Say £2200 at 10%, £31800 at 22%, and £5640 at 40% (total tax £9472), instead of your normal £5225 at 0%, £2200 at 10%, £27575 at 22% (total tax £6286), so I guess you'd be overpaying just under £1000.

Don't worry. If you overpay you can get a refund. It could be worth asking for an adjustment to your tax code which would result in you not overpaying that much, if your other request, to spread the repayment over 2 years is unsuccessful.

Well my wages will be down by 183 a month anyhow so I don't fancy being down by another 83ish. I think I need to get them to spread it over more time to avoid this. After all it took them over three years to spot the error!!!

I'll get on the phone to them tomorrow.

Thanks,

Tim

>

It is better to pay it of in one go if you can. You could try to offer to pay the IR by installments, outside PAYE.

The K code means your total taxable benefits exceed your tax allowances. Basically you have a 'negative' tax allowance. So bigger slices of your income are taxed at 10%, 22% and 40% respectively. The slice taxed at 0% is zero. I think it can also happen if you have a gaz guzzling Co car & fuel allowance.

The OP won't actually be paying tax at the HR. He's not in that band. The calculations for paying tax back my result in using the higher rate but only to the extent of reclaiming the tax owed. I would recommend the OP calculates the tax payable for all the years involved with the c*ck up and repayment and compares the tax payable with the tax paid.

??? I disagree...

£35k pay + 4645 = £39,645 taxable.

So over £5k will be taxed at 40%, so likely that £5k x 18% too much tax will be paid....

Thanks for your help so far. The underpayment dates back to 2003 an lasted nearly 4 years before it was spotted by the IR. Of course if STRICTLY EDUCATION who were adminstering my payroll on behalf of my employer had done their job properly then the underpayment would never have occurred. They CLAIM they never received my tax coding and then messed up for the following

3 years until the payroll was taken in house by my employer.

I have contacted the Inland Revenue but they are waiting for my papers to be transferred from Liverpool to Birkenhead (a distance of 2 miles!) and this has so far taken a week!

I am trying to get the IR to allow me to repay over 2 or 3 years as after all the error wasn't spotted by them for a similar time either!

Tim

Didn't you figure out at the time you were paying too little tax! Or did you just ignore it?

CRF

But that's a device to reclaim back the tax due. He's being taxed on £35,000 plus he's paying extra tax from previous underpayments.

You haven't been paying attention, have you?

Too focused on the theatre, no doubt.

What is being complained about is that this "device" would be collecting substantially *more* than the underpayments.

It looks likely that some clueless drone at the tax office reckoned "Ah yes, we need to collect an extra £2200 from this (on the face of it) basic rate taxpayer, so we'll whap £10k off his tax code." without bothering to do the sums properly, failing to notice that this device would put him artificially into the higher rate band.

It's not like you to miss an opportunity to re-remark upon substandard competence at the IR.

You haven't been pay "The OP won't actually be paying tax at the HR. He's not in that band. The calculations for paying tax back my result in using the higher rate but only to the extent of reclaiming the tax owed. I would recommend the OP calculates the tax payable for all the years involved with the c*ck up and repayment and compares the tax payable with the tax paid."

I advised the OP to calculate what is owed with what is getting repaid and then when it is nearly sorted out they can ask for the code to be changed.

For a few hours but the rest of the time I was trying to get tax returns and accounts completed. Sometimes I wish I don't recommend 31 March as a limited companies year end!

There was a distraction with Mike Robson. Whatever happened to him. I suppose discussing the issue with his accountant is still not his top priority!

I wasn't bothering to do the calculations because I had enough on my plate. I suppose there is the semantic issue of whether you are being taxed at a HR when you are paying underpaid tax.

If they were competent they would have a computer program to calculate the correct code in any given set of circumstances. I think the problem is that most HMRC tax staff don't know anything about tax and concentrate on things like entering the wrong date for the receipt of tax returns and stuff like that.

Well the error originallyoccured back in April 2003 when the child tax credits were taken off earnings and moved to be paid directly into peoples accounts. The problem was that at the time I also got promotion and like most people expect the PAYE to be sorted out accurately by my employer or their agents. I do realise (now) that I have a 'legal' responsibility to check my payslips etc but that does not affect the fact that 'STRICTLY EDUCATION LTD' messed up big time. I also believe that their claim that they never received notice from the IR is dubious in the least.

The IR are also at fault for not spotting the error for 3 YEARS. I believe therefore that I should be entitled to pay back the money over that time (or two years at least)

That said seeing as I do have topay some money back then I don't want to end up paying more than I should even if I can get it back later.

Tim

Oh yes I have.

I remember taking that in and wondering what you were on about. It has already been established that what is owed is £2200.

"Oh Romeo, Romeo, wherefore art thou self-employed?" "Is this a non-corporate distribution I see before me?"

Perhaps he's looking into the ramifications of an insurance scam involving a gas leak.

Fair enough. PAYE doesn't actually tax you, it just makes deductions from pay and gives them to the tax man "on account". In fact he won't be taxed at the higher rate, but the deductions will be calculated as though he would be. The point at issue is that this mechanism for correcting the underpayment will in fact result in an overpayment when all is said and done.

Which is what I was trying to say. I have now had a phone call from the IR and they are 'deciding' how to allow me to pay (over more than one year?). If I pay over 2 years rather than one then 1100 per year calculated the same way will still put me (slightly) into the 40% bracket. I do need this to be sorted before the April payroll so 'hopefully' it will now that it seems to be in the hands of a human being rather than a computer that just issues notices.

Still find the whole thing irritating. Yes maybe I should have checked my tax but like 99% of the population you expect your PAYE to be administered properly rather than being ballsed up by a company like Strictly Education!!!!!!

Tim

Surely that is only half of the equation? You have to calculate what has been "overpaid" in later years.

I'm still amazed that these tax code changes appear to be made manually. HMRC are a mess of an organisation!

I see so many P45s generated incorrectly. I think businesses assume anyone can produce payroll.

I don't blame you at all. Unfortunately, I would say that the majority of payrolls are administered by people who have insufficient knowledge.

tax.

Exactly but from the companies own website:

"It is critical that all staff are paid accurately and on time. Strictly Education prides itself on being able to deliver a highly efficient payroll service"

and

"We understand that people's pay is a highly emotive area and we make it our business to ensure that we are available to answer any queries or offer advice to you and your staff whenever these issues arise. We take full responsibility to ensure that the service we provide is efficient yet sensitive to the needs of our customer"

Yeah right whatever!!!

Tim