Paid too little tax - please help!

[Lisa9982]

Hi All,

Thanks so much in advance for any help given. My partner has just had a hefty (to us) bill from the tax office of almost £2k due to paying too little tax. He is employed full time PAYE and has a company car. The letter states he has paid too little tax due to his employer declaring his company car on his P11D @ £6398 and that he has not paid any tax throughout this year against his company car.

He's had various tax codes through the year as work messed up the tax for 2014/15 also.

His employer are far from helpful saying that he is responsible for ensuring that the tax he pays is correct. Is there a simple way I can work out or understand how much tax he should be paying per month or what his tax code should be?

Thankfully for 2016/17 they have left his tax code as normal and have added the monthly car amount to his salary so this is now being taxed normally (we hope!!)

[JRG]

Simply put, your husband's taxable income is his salary plus his P11D figure, less his personal allowance. Any taxable income up to the basic rate band is taxed at 20%, and any amount exceeding the basic rate band is taxed at 40%.

Example 1: Salary £35,000 and P11D £6,398.
Taxable income: £35,000 + £6,398 - £10,600 = £30,798
Income tax: £30,798 x 20% = £6,159.60

Example 2: Salary £45,000 and P11D £6,398.
Taxable income: £45,000 + £6,398 - £10,600 = £40,798
Income tax: (£31,875 x 20%) + (£8,923 x 40%) = £9,944.20

Note: The above 2015/16 examples assume the basic personal allowance is £10,600, the basic rate band is £31,875, and that there is no other income (e.g. bank interest).

As the P11D is usually issued after the end of the tax year, your husband may have been taxed on his salary alone during 2015/16. If so, then a self assessment tax return would be required so that HMRC can calculate the correct amount of tax due (before they do it themselves and send out their letters).

He should be all right for 2016/17, depending on any other income he may receive (e.g. bank interest).