Tax letter on your doormat: your questions answered
Anyone listening to the news these past few days will know that tax has been the hot topic.
This article is your chance to find out what the fuss was about, and what to do if it affects you.
This year an unprecedented number of people are being contacted by HMRC to be told their tax is wrong. The two years mainly involved are 2008/09 and 2009/10. In all 5.7 million PAYE taxpayers (all pensioners or employees) are being written to between now and Christmas. Remarkably that means 15% of everyone in the country who pays tax via PAYE will get some news – good or bad. Most of them are being told they are due a refund – with the average refund being £470. However 1.4 million people are being told they have extra tax to pay. Sadly for those getting the bad news, the average tax owed will be £1,400.
By the way beware of tax scams. Lots of criminals contact people by genuine-sounding phone-calls or emails about tax repayments or tax bills. HMRC will NEVER contact you by phone or email about a rebate. It will always be by a letter though the post. Also if you owe tax the first time you hear of it will always be by letter. (If you let tax debts sit and ignore them then you may later on be phoned about them).
So why has this all happened?
Firstly HMRC does a review of employee tax every year and writes out when it finds something wrong. This year however many, many more people are being contacted. The HMRC form they send out says P800T at the bottom left.
Secondly a lot of tax codes issued in 2009 were wrong. HMRC’s brand-new system for PAYE employees (those who lose their tax before they get their pay) was not a runaway success. Instead it produced thousands of incorrect tax codes. People were issued with codes showing jobs they left years ago. Others got codes which were absurdly wrong. The upshot of this is that some of the incorrect codes meant people paid too much or too little tax.
Sadly while some of the tax problems are caused by HMRC error, for most people there will be no choice but to pay the bill. This is because HMRC simply views your record as being wrong. Only in very limited circumstances will they write off the bill because you had long ago made sure they had all the information they needed.
HMRC’s website statement about the tax calculations, and the limited ways that bills can be written off, is available at http://tinyurl.com/2g6mf6b
Before readers get too agitated let’s consider the types of people unlikely to be affected by all this and those most likely to be hit.
These tax calculations are unlikely to be sent out to people who:
- Are employees who have had the same job for the past 3 years and do not have perks like a company car or medical insurance, or
- Are self-employed, or
- Already file an annual Self Assessment Tax Return.
On the other hand the people most likely to find their PAYE tax was wrong are:
- Employees with company cars, or
- Pensioners with a state pension and more than one works pension, or
- Employees who changed jobs in the last 3 years, or
- Employees who hold more than one job, or
- Employees who have other adjustments made to their tax code – say for a small amount of income from untaxed interest, rents etc.
If you receive one of these P800 tax calculations from HMRC what should you do?
1. Check which tax year it is for.
2. Look at the income sources at the top right. The amounts received and the tax deducted are shown. Do these match forms P60 or P45 which you have?
3. Do the tax allowances given to you seem right? If aged under 65 then the Personal Allowance was £6,035 in 2008/09 and £6,475 for 2009/10 and 2010/11. Aged over 65 and you get extra allowances. Maybe HMRC doesn’t know your age?
4. If something seems odd, or you do not understand it, then write to the tax office which issued the calculation.
If the whole thing scares you then you could always ask for outside help. For a flat fee of £80 we will review and explain the P800 tax calculations for up to two years, and take up any concerns with HMRC. Click here for more details. Alternately you could ask from help from the Citizens Advice Bureau or a local accountant. The more forms P60 and P45 you can pull together the more help someone can give you.
Adrian Huston, a former tax inspector, is a director of Belfast tax and accountancy firm Huston & Co – www.huston.tv or 028 9080 6080.
If you have received a letter from HMRC the Belfast Telegraph would like to hear your story. Call the newsdesk on 02890 264420.