Help with Tax codes and owing taxes

[Roo71]

Hi I hope someone can maybe help with my tax nightmare, as I really don't understand what is happening. I'll try and keep this as brief as possible.
A little background is that I work full time and also get a pension - both incomes are taxed.

I got caught up in the tax computer fiasco in 2010 and ended up owing the taxman £1500, to be honest I didn't really question it at the time and decided it was easier to just pay than try and fight it.

In April 2011 they then issued me with a K tax code for my pension to take into account any further monies that I might owe and to prevent another underpayment. This essentially means my pension is now in negative personal allowance.

In my main employment my tax code is BR and I don't have a personal allowance at all. They wrote to me and told me that the K code along with my BR would sort everything out.

However, I have just completed my self assessment online and it tells me I now owe them £1700. I am tearing my hair out trying to work out how. I genuinely believed that all this was sorted and they had written and assured me that it was. I am now once again facing a tax bill that I don't have £1700 lying around to pay.

We have no other source of income in our household, get no taxable allowances, no benefits and no employer benefits, so I am at a total loss as to how I owe them for the 2nd year in a row, when they issue my tax code and they tell me it's correct.

I will naturally pay anything that I definitely owe, but it is so demoralising, you try to be a decent person and lead an honest life, you trust that when you are on a PAYE system that everything is in order. Then you get whapped with a huge bill.

Any help anybody can offer me would be hugely appreciated, I have read and researched all night and am still baffled by the whole mess.

[JRG]

The K Tax Code you received in April 2011 would be for the current 2011-12 Tax Year (check your Notice of Coding to confirm), but the SA you have just completed online would be for the previous 2010-11 Tax Year (as the current 2011-12 Tax Year hasn’t finished yet).


I suggest that you double-check your SA with reference to the P60s you received from your pension provider and your employer for the 2010-11 Tax Year. The following calculation assumes that you have no other taxable income (as you’ve stated), that you are under the age of 65 and that you are NOT a higher rate taxpayer.

From P60s:
Pension Pay + Employment Pay = Total Income.
Pension Tax Deducted + Employment Tax Deducted = Total Tax Deducted.

Calculate:
Total Income – Personal Allowance (£6,475) = Taxable Income.
Taxable Income x 20% = Income Tax Liability.

If your Income Tax Liability is more than your Total Tax Deducted then you owe HMRC for underpaid tax.
If your Income Tax Liability is less than your Total Tax Deducted then HMRC owe you for overpaid tax.

I would also suggest you check the figures for the 2009-10 Tax Year, to confirm HMRC’s original calculation.