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Where Taxpayers and Advisers Meet

Self assessment although I'm PAYE

Matt james
Posts:3
Joined:Tue Apr 13, 2021 10:46 pm
Self assessment although I'm PAYE

Postby Matt james » Tue Apr 13, 2021 11:00 pm

Hi first time here! I'm employed PAYE and earn £45k before tax per year. I have a company car - cost new around 30k i expect. I pay monthly for private fuel too.
My wife receives child benefit (I think its called that?)
The past three years HMRC have told me to do a self assessment and then I get a bill for more tax!! I don't understand why though as my earning aren't over 50k! Now say 4 years ago I had a good year and it may have crept over 50k possibly but not since then!

Am I filling the form out incorrectly? Should it be just p60 info or what? I'm so stuck i don't know what to do,

Thanks!!
Matt

robbob
Posts:3146
Joined:Wed Aug 06, 2008 4:01 pm

Re: Self assessment although I'm PAYE

Postby robbob » Wed Apr 14, 2021 8:30 am

The past three years HMRC have told me to do a self assessment and then I get a bill for more tax!! I don't understand why though as my earning aren't over 50k! Now say 4 years ago I had a good year and it may have crept over 50k possibly but not since then!

Its the sum of the parts that matter

P60 income
+ p1d1 benefit value
less the all important deduction for any pension payments made by you direct or deducted from your "net pay" (ie if employees pension contributions didnt reduce your taxable pay ignore employers contributions salary sacrafice (probably nil if you wokr for huge company??)
+/- any other taxable adjusts

I suspect the culprit here will be your snazzy company car (hmm bmw or audi?) that could easily have a p11d benefit value of 8k plus - note for past few years the benefit values have been increasing each year at a decent lick !!

Note depending on the amount of kids you have you are probably paying 40% tax + 17% child benefit tax charge (2 kids - higher charge more kids less 1 kid )and 2% ni for earnings over the 50k bubble so 59% down the swanny - getting the car benefit down (electric cars are super tax efficient at present) or adding to pension to get the vital number below 50k will avoid you throwing money down the drain - anyone on earnings between 50k and 60k should really be getting their income below the magical 50k figures UNLESS they are happy paying 57% + tax. Obvioulsy locking money away in pension for 1/3 of your life may not seem ideal but is often the lesser of two evils - many overpay on mortgage on ultra low interest rates while at same time suffering the 57% tax rate on this marginal earnings - i sometimes question the wisdom of this lack of at least looking at the available options for some who say (i can't manage on less than 1k per week).
No biggie as long as you understand the full picture and arent throwing your own money down the drain.


salary sacrafice extra into pension is the bees knees here tax wise as you can also avoid the 2% ni charge

Am I filling the form out incorrectly? Should it be just p60 info or what? I'm so stuck i don't know what to do,
Possibly although i suspect its purely the 8k+ car benefit - go back in and look at your calc for last submitted year
salary should be per p60
benefit should be per p11d
if the sum of those 2 is over 50k thats your "starting problem"

common mistakes
not entering pension contributions on tax return - or entering at cash value rather than grossed up value - careful not to claim for the wrong type of pension payments - a gooe double check is look at what goes into your pension pot in that tax year and its the stuff that has 25% added in by hmrc when it gets in the pot that should end up on your tax return (grossed up value)

Also ensure if you can claim tax relief on work miles you do so - it sounds like your employer is covering the work related fuel in full though - so its unlikley there is a claim.

If you have opted out of workplace pension then your overall loss is even igher as you would also be missing out on the extra 4% freebie or so matched contribution by your employer !!!

Matt james
Posts:3
Joined:Tue Apr 13, 2021 10:46 pm

Re: Self assessment although I'm PAYE

Postby Matt james » Wed Apr 14, 2021 11:41 pm

Great thanks for the reply ! - its actually a volvo can't stand bmws or audis! And its now 5 years old so peed off im paying tax as if its new!!

So its my P60 wage plus car benefit on p11d - not checked it but 8k ish ?

With pension part im a bit confused - do you mean my workplace pension contribution each month?

robbob
Posts:3146
Joined:Wed Aug 06, 2008 4:01 pm

Re: Self assessment although I'm PAYE

Postby robbob » Thu Apr 15, 2021 9:03 am

With pension part im a bit confused - do you mean my workplace pension contribution each month?
Its only certain types of specific pension contrbutions that you make yourself only - problem is there is two types and no one ever seems to know what type of pension they are paying and the fact they call payments deducted from gross salary as "net pay arrangements" doesnt help.

In summary pension payments will normally only go on your tax return if you make them direct from your own pocket or if you make "employees contributions" that are deducted from your NET pay - if you make employees contributions check you payslip to see if the deducted amount reduces taxable pay - if taxable pay is reduced you have already had full tax relief(p60 will be lower) and these payments are deducted from your "gross pay" - if taxable pay is not reduced you can claim higher rate relief via tax return. Check full pension documentation and ask scheme provider tax rules if you are unsure.

To be clear here you never include anything paid via employer - if payments are via salary sacrafice its your employer making those payments not you (those shouldnt be confused anyway as the adjust reduces taxable pay anyway) - same with employers contributions you are not mkaing those payments.

Note if you are paying into a specific company scheme its highly unlikley you will be due any relief.

Note always be careful to check if your employers advises change to your pension arrangements - as that could indicate type of pension may be changing.

If you have any doubts always double check pension contribution details or take specific advise before you submit any self assessment returns as hmrc will simply process what you enter in the belief that you are a pension tax ninja - i would recommend taking the time out to personally fully understand how tax relief works on pension payments works.

Matt james
Posts:3
Joined:Tue Apr 13, 2021 10:46 pm

Re: Self assessment although I'm PAYE

Postby Matt james » Thu Apr 15, 2021 10:20 pm

You're a star thankyou so much, I appreciate the full on reply!!


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