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Where Taxpayers and Advisers Meet

Self Assessment & Underpaid tax included in PAYE coding

Dino
Posts: 5
Joined: Fri Apr 19, 2019 6:54 am

Self Assessment & Underpaid tax included in PAYE coding

Postby Dino » Fri Apr 19, 2019 7:13 am

Hi all, completing my self assessment, HMRC reported an underpaid tax for earlier years included in my tax code for 6 April 2018 to 5 April 2019 (from your PAYE Notice of Coding).

I actually completely paid off those taxes during last year with a different PAYE code.
Looking at the statement on the HMRC I see no outstanding taxes are owed, and in January I received a letter confirming such figure.

Thus seeing an underpaid tax during the SA is a surprise to me. I expected that to be 0: am I wrong?
Living in the UK for few years: continuously learning life in the UK.
Sometime I feel like an orphan looking for help to understand this new life

D&C
Posts: 61
Joined: Thu Dec 22, 2016 10:04 pm

Re: Self Assessment & Underpaid tax included in PAYE coding

Postby D&C » Fri Apr 19, 2019 5:21 pm

You are almost certainly wrong.

From what you have posted this is what has happened.

You filed your 2016:17 Self Assessment return and had some tax to pay.

You didn't pay this tax as HMRC agreed to include it your 2018:19 tax code. And your Self Assessment account was adjusted to reflect this i.e. you didn't need to make a payment yourself to HMRC.

During 2018:19 your employer or pension payer used the code supplied by HMRC and you will have paid additional tax to pay off the tax owed from 2016:17.

All good so far. Your 2018:19 P60 will show your taxable income and the tax deducted during the year. This tax amount will be higher than it would otherwise have been.

But let's see what would happen if you failed to include this tax underpaid for earlier years on the return as per your opening paragraph.

For simplicity this is a very basic example but you should see the basic principle. We'll say the tax underpaid for earlier years is £500 and you have no other complexities, just the salary from your P60 and will owe no new tax in 2018:19

Taxable income £21,850 (per P60)
Less Personal Allowance £11,850
Income to be taxed £10,000
Tax due £2,000
Tax paid £2,500
Refund due £500

So you end up getting the extra £500 you paid to clear the tax owed from 2016:17 back. When you shouldn't get it back. Hence the need for the entry you are questioning.

Dino
Posts: 5
Joined: Fri Apr 19, 2019 6:54 am

Re: Self Assessment & Underpaid tax included in PAYE coding

Postby Dino » Fri Apr 19, 2019 8:23 pm

Thank you. That helped me clarify other bits as well.
Living in the UK for few years: continuously learning life in the UK.
Sometime I feel like an orphan looking for help to understand this new life


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