Reduction of Tax Payments on Account

[Craig at Nixon Williams]

A related question - is it common for payroll systems to not be able to accurately deduct tax on a one-off annual bonus, that pushes an individual's earnings over the threshold above which one's personal allowance is to be reduced?

Payroll software will not reduce your personal allowance or adjust your tax code for you. If you have a 1000L tax code then the payroll software will give you a £10,000 allowance over the year irrespective of your income.

The personal allowance will only be reduced when you file a self-assessment return - at that point HMRC will also issue an amended tax code for the following year taking into account the reduction. This will simply be a temporary code, as it is likely that a further adjustment will be made following the submission of that year's self-assessment.

Craig

[intalex]

Payroll software will not reduce your personal allowance or adjust your tax code for you. If you have a 1000L tax code then the payroll software will give you a £10,000 allowance over the year irrespective of your income.

The personal allowance will only be reduced when you file a self-assessment return - at that point HMRC will also issue an amended tax code for the following year taking into account the reduction. This will simply be a temporary code, as it is likely that a further adjustment will be made following the submission of that year's self-assessment.

Craig

This is actually the reason for 80% of my final tax liability (which itself was less than 10% of my total tax charge for the year, with the remaining 90% deducted at source). Unfortunately, HMRC's systems have reinstated the payments on account as a result.

When I think about this logically, I feel there are very valid grounds for appealing this.

Unless I'm being biased and someone can correct my thinking?