Tax return - Confused

[Jay]

I am really struggling to work out how the HMRC owe me money but my most recent tax return shows they owe me over £200.

I have gone through it and the only thing I can see that may have caused this is a change of job in September 2012, possibly something to do with my student loan repayments. I have no idea why it has to be so confusing and also why the hell don't they put student loan data on the P45?

[peterb]

If you are completing your return online, the calculations should give you a good idea of how the tax is calculated.

A break in a job may have resulted in you paying too much tax in anticipation of pay you didn't receive, although Real Time Reporting should correct that. Don't forget that the tax return you are completing now is for the tax year 2012-2013 which ended on 5 April 2013 - so changes in your tax position since then won't be reported until 5 April 2014.

If you do think you have paid too little tax, either query it with HMRC now, or put it into a savings account until you complete your tax return for 2013-2014 (i.e., after April 6 2014) when any adjustments should carry over.

If you are on PAYE for all your earnings, and you have completed the return with the documentation you have ben issued, then you should not be liable for any penalties etc - so get that return in by 31 Jan, or you will receive an automatic penalty for failure to submit on time.

(Disclaimer - I am not an accountant or tax lawyer - this is only my opinion, not professional advice))

[Jay]

I used my P45 from my first job that I left in Sep 2012 , my P60 from my second job and added them together, I then used my student loan document that is sent each year to tell me how much I had paid off for that tax year.

[Saracen]

.... I have no idea why it has to be so confusing and also why the hell don't they put student loan data on the P45?

As Peter said, I'm not an accountant (well, I am, but a very long time ago and don't/didn't deal with student loans) or tax lawyer, so .... this is personal opinion only, not professional advice.

As I understand it, the ONLY information an employer should have about your student loan is an instruction (via P45, or direct from HMRC as a "Start" instruction), possibly a "Stop" instruction, and the amount of repayments they have collected from you and remitted to HMRC.

A student loan is NOT a standard loan. It is, more accurately, a sort of conditional graduate tax.

So, only HMRC (and the Student Loan body, or whoever they've sold the book to) will know the amount of the loan, though others (lenders of loans, mortgages, employers, etc) will know of the existence of the loan.

So, the logic is, the SL will not affect your credit rating, or credit score, and nir will any repayment history. However, the dact that you have an outstanding SL will indicate to lenders a hit on your post-tax disposable income. Potential lenders know the basis of the scheme, so they know repayment rates, and the threshold.

It is, therefore, to the benefit of those with SLs that, for instance, mortgage companies and credit agencies don't have access to outstanding valances, payment records, etc. Just, asuming you declare it on loan applications, is asked (and lying, if asked would, of course, be likely to be deemed fraudulent) that the SL exists. But it could be £5000, or £55,000.

As for why it's confusing ... Jay, wake-up man, it's tax form. They're supposed to be confusing. Wait until you get one with a self-employment section, a section for trusts, another for property income, and for foreign income and, of course, the self-employed section. Etc.

Who does the government get to design tax law? Accountants and tax lawyers. Who gets to design the forms? Accountants and lawyers. And who do most people end up employing to sort out the "confusion"? Accountants and lawyers.

It's confusing because it's a self-reinforcing job creation scheme for .... yup, you got it, accountants and lawyers.

Wanna beat the system? Study accounting, tax law or both.



Sorry Jay, I've got a nasty headache and my cynicism is hanging out more than normal. Which is saying something.

[wasabi]

I am not a qualified financial adviser. Bearing that in mind.

Sometimes when you change job your new employer accidentally puts you on an emergency tax band for a while as they don't have the correct code. HMRC would be just refunding the money after the mistake.

Lots of other potential reasons - pension, offsets, losses - all sorts.

Tired advice from the taxreturnweary - if it is a couple of hundred quid either way just/pay or take it. They don't, in my experience, nitpick too far. If you've done it in good faith, trying to get to the bottom of it is likely to drive any non-accountant insane and cost more in time than you'll get back.

[virtuo]

Maybe they are just being nice?

[Jay]

Maybe they are just being nice?

I doubt it

[peterb]

The on-line systems for self-assessment are pretty good, so if you have entered all the data, the resulting tax assessment is pretty accurate. The tax helpline is actually quite helpful, although you may face longer waiting times at this time of year as the 31Jan deadline approaches.

[Jonatron]

The on-line systems for self-assessment are pretty good, so if you have entered all the data, the resulting tax assessment is pretty accurate. The tax helpline is actually quite helpful, although you may face longer waiting times at this time of year as the 31Jan deadline approaches.

I wouldn't say it's pretty good, these are the issues I had:
When you register, you have to wait on a letter in the post to log in. Not clear to leave fields blank or to put in 0. It's not clear that after you submit, you have to wait until the tax return is 'received', until you find out how much you actually owe, until then there's 2 figures in different places, both of which are wrong.

The deadline might be the 31st, but to get everything you need sorted (eg interest statements from banks), you'd probably want to do it at least a couple of weeks before the deadline.

At least they don't band about the "tax doesn't have to be taxing" line any more.

[cheesyboy]

http://www.listentotaxman.com/

Put your salary in to the above calculator, change to 2012/13, tick the student loan box, and then see how much tax you should have paid. Compare with what you have actually paid per your P45 and P60.

[Chadders87]

If I am not mistaken, the P60 should be a summary of all tax paid in the year, including that from previous employment (as long as you passed you new employer the P45).

If you are adding your P45 and P60 together then you will be duplicating the tax paid, therefore making it look as though you paid more tax than was due.

[Jay]

I wouldn't say it's pretty good, these are the issues I had:
When you register, you have to wait on a letter in the post to log in. Not clear to leave fields blank or to put in 0. It's not clear that after you submit, you have to wait until the tax return is 'received', until you find out how much you actually owe, until then there's 2 figures in different places, both of which are wrong.

The deadline might be the 31st, but to get everything you need sorted (eg interest statements from banks), you'd probably want to do it at least a couple of weeks before the deadline.

At least they don't band about the "tax doesn't have to be taxing" line any more.

I agree, I wasn't sure if it was 0 or blank. It allows you to do both so I assume unless it says put 0 then blank is ok.

If I am not mistaken, the P60 should be a summary of all tax paid in the year, including that from previous employment (as long as you passed you new employer the P45).

If you are adding your P45 and P60 together then you will be duplicating the tax paid, therefore making it look as though you paid more tax than was due.

Yes the P60 should have both but my previous employment section of the P60 has 0 for pay and tax hence adding the P45 to the P60 in this case.

[Chadders87]

Ok then that seems to be the issue. Your new employer didnt account for your previous earnings when working out your new tax payments.

Apologies for teaching people about sucking eggs etc: You are entitled to earn a set amount before you have to start paying tax, this is called your tax free allowance. Your first employer would have taken this allowance and split it over 12 months to reduce your monthly tax payments proportionately and equally.
When you leave and go to a new job, your new employer should take the P45 to basically work out how much of this allowance you have remaining, and likewise use it to split the allowance over the remaining months.

Now if they have simply not accounted for the previous jobs allowance the above would indicate you owe the government more tax (using up the allowance twice).

As this is not the case, and the P60 shows no tax from a previous employer, I'd guess they have put your tax code at basic rate (indicated by an X or BR on the P60 tax code box). This means they have not applied your tax free allowance to your pay and therefore you have paid more than is necessary.

It is faily common practice for a new employees tax code to be entered by payroll as BR or X while waiting for the P45. you'd pay more tax in month 1 but then less to compensate for it in months 2+. Unfortunately I'd guess they where lax in their duty to update the records when it finally arrived.

[jim]

I think for every year of my life that I've earned an income, in all but one I've been overcharged by the HMRC, and had to chase them up to get my money back. In the other year, they undercharged me. You'll no doubt be surprised to learn that for the first, and only time, they decided to chase me up. Albeit about 18 months later.

Oh well. With a bit of luck they'll get it right in 2014/15. Given the screw-ups so far this year, I've already given up hope on 2013/14.

[peterb]

I have rarely if ever had a problem with my personal tax return - although most of my working life I was in PAYE schemes - and long before SA, when the tax form was filled in by hand - but then IR (as it was then) did the calculations for you.

SA on line is easier, but as Jay has found out - you do need to check the calculations in case there are any surprises. The secret is to do the return early - gives time for corrections in year later. I try and get mine done by June July, putting aside a couple of hours once I have assembled the supporting documentation, which I keep in a large file as it comes in.

[scaryjim]

... Now if they have simply not accounted for the previous jobs allowance the above would indicate you owe the government more tax (using up the allowance twice).

Not necessarily. Depending on their systems, they may have simply set up the tax allowance pro-rata for whatever remained of the year, assuming you had used up the rest in the previous job. There are all sorts of ways this could've ended up with you being charged too much tax (and without knowing how much you earn, it's hard to know how big an error £200 actually is).

Apart from anything else though, OP, I assume you are self employed in some capacity? If not, why on earth are you completing a tax return?