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Where Taxpayers and Advisers Meet

Paid too little tax calculation

Mandria
Posts:1
Joined:Mon Nov 25, 2019 10:07 am
Paid too little tax calculation

Postby Mandria » Mon Nov 25, 2019 11:30 am

Hi,

I'm clueless about this sort of thing, but my wife received a letter saying she paid too little tax for the year 18/19.
Not sure if I'm allowed to link to a picture of the letter: https://imgur.com/a/ot0jV8i

The calculation breakdown from the letter:


Income
*Employer Name* Income = £12,459.89 (Income Tax = £120.00)
Total Income = £12,459.89 (Income Tax = £120.00)

Less your allowances
Personal Allowance £11,850.00
Total tax free amount £11,850.00
Your total taxable income £609.89

Income Tax Rates
Basic rate at 20% on £1,799.00 (Income Tax = £359.80)
Total £1,799.00 (Income Tax = £359.80)

Result
Total tax payable £359.80
Tax you've already paid £120.00
You owe HMRC £239.80


I don't understand where the £1,799.00 figure comes from.
If the total taxable income is £609.89, where is the other £1,189.11 coming from?
Am I missing something really simple or is this an error on their side?

jerome.lane
Posts:237
Joined:Mon Aug 12, 2019 8:41 am
Location:Sandhurst, Berkshire
Contact:

Re: Paid too little tax calculation

Postby jerome.lane » Mon Nov 25, 2019 3:17 pm

That's odd! Unless there's been a transfer of personal allowance or higher income child benefit charge (if you earn over £50k and you have children) that's not correctly showing on the calc to get the extra £1k, it looks like an error by HMRC.
Jerome Lane
Tax Adviser
Telephone: 07943 005902

D&C
Posts:154
Joined:Mon Nov 25, 2019 11:35 pm

Re: Paid too little tax calculation

Postby D&C » Mon Nov 25, 2019 11:42 pm

The tax looks correct for someone who has applied for Marriage Allowance for that tax year.

The Personal Allowance figure should be £10,660. Not sure why it is being shown as £11,850.

With a bit of work she could probably get £238 knocked off the tax due. But in that case you would highly likely owe £238 more than you do at the moment.

JRG
Posts:424
Joined:Wed Feb 03, 2010 4:40 pm

Re: Paid too little tax calculation

Postby JRG » Sat Nov 30, 2019 1:50 am

D&C is correct.
Your wife must have applied for the Marriage Allowance which enables 10% of her personal allowance to be added to your personal allowance, which for 2018/19 was £1190.
If her original personal allowance was £11,850 it would have decreased to £10,660 (= tax code 1066). Correspondingly, if your original personal allowance was £11,850 it would have increased to £13,040 (= tax code 1304).
Your wife should check the 2018/19 P60 she received from her employer to see which tax code they applied.
It appears to me that her employer may not have updated her records with the tax code that the HMRC applied to her, and this has resulted in the underpayment of income tax.

D&C
Posts:154
Joined:Mon Nov 25, 2019 11:35 pm

Re: Paid too little tax calculation

Postby D&C » Sat Nov 30, 2019 11:46 am

I think that is a bit too much of an assumption. The op's wife could have just applied a week or two back, the employer may have done nothing wrong.

A lot of people seem to struggle with Marriage Allowance and forget that their current circumstances may have been different in an earlier tax year.
Correspondingly, if your original personal allowance was £11,850 it would have increased to £13,040
You cannot have a Personal Allowance greater than £11,850 for that tax year.

If you are the recipient of Marriage Allowance your Personal Allowance stays the same but you are entitled to a tax deduction off your liability for the year (£238 in 2018:19). Doesn't make much difference for most people but it can make a huge difference for a few.


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