21-22 Self Assessments ... why are tax totals off by so much this year?

[mogga71]

Has anybody else filled in their 2021-22 Self Assessment online forms?

I am with an umbrella and for the first time, I find myself now owing 2.5 k tax that I have underpaid.

I thought fair enough ... but my wife works for a bank and she has exactly the same issue ... but owes even more. Every other year she has been owed money.

Using the online tax calculator https://www.moneysavingexpert.com/tax-calculator/ their figures match the SA figures.

Has anybody got an idea how our employers have got it wrong so badly for the 21-22 year ..... is anybody else in the same boat?

I will ask my Umbrella on Monday.

[eek]

20-21? Surely they should have been done before January?

[mogga71]

As always eek ... thanks. Yip 21-22. DOH!

Is it possible to change a thread title?

[cojak]

Will do.

[Gulliver89]

Is your tax code as expected?

[mogga71]

Is your tax code as expected?

You don't actually have anywhere to enter your tax code on the SA.

I am pretty sure that it all comes down to the Yearly Personal Allowance. You will notice that the figures for £125,000 are very different if you leave the Tax Code blank when comparing to entering 1250L but I now believe there is a chance that the figures are actually more accurate if you leave the tax code blank. It appears to me that the SA calc is operating as if no tax code is being used in that tax calculator.

Basically if you earn 125,000 your Yearly Personal Allowance should be zero but, for some reason if you enter 1250L the personal allowance looks wrong to me on that calculator . Big question is ... did our employers adjust our salary payments accordingly or is the SA calc actually correct leaving us with pretty hefty payments owing? I am beginning to think it's the latter.

[eek]

You don't actually have anywhere to enter your tax code on the SA.

I am pretty sure that it all comes down to the Yearly Personal Allowance. You will notice that the figures for £125,000 are very different if you leave the Tax Code blank when comparing to entering 1250L but I now believe there is a chance that the figures are actually more accurate if you leave the tax code blank. It appears to me that the SA calc is operating as if no tax code is being used in that tax calculator.

Basically if you earn 125,000 your Yearly Personal Allowance should be zero but, for some reason if you enter 1250L the personal allowance looks wrong to me on that calculator . Big question is ... did our employers adjust our salary payments accordingly or is the SA calc actually correct leaving us with pretty hefty payments owing? I am beginning to think it's the latter.

That would depend on what the payroll software does

edit - which is nothing because the only way it could handle it is to deduct large sums from the payslips that take you from £100,000 to £125,000 which no one wants to do...

[SimonMac]

I have always found HMRC are pains in the arse's, but their sums are always 100% accurate with the information that they have been given, I would look to see where you/your umbrella might have gone wrong rather than thinking its HMRC

[eek]

Right an explanation - which will probably be similar to the umbrellas but may not.

If you are known to be on over £125,000 HMRC are likely to send you a 0L or similar tax code. When that is entered into a payroll system the tax will be correct.

But you can't be sure that an umbrella worker is going to earn £125,000 so it's hard to justify getting HMRC to update the code because all contracts are temporary and not permanent.

And because an umbrella cannot assume that you will be there all 12 months (sidenote - a lot of contractors want every penny they can get now) it's easier on all fronts to operate with the 1250L (now 1257L) allowance and leave the contractor to pay the bill at the end of the year.

Now the umbrella should probably make it clear that if you income exceeds £100,000 additional tax will be owed but that may well be hidden within some documentation you've already received (if it's not I would suggest they add it as a line on any illustration provided) but I can see why they may not want to.

but basically once you start earning over £600 a day inside IR35 you have 2 options

1) Use a 1257L code and save £2500 to pay a forthcoming bill
2) use a 0L code and potentially get a refund in April / May.

And you can see why an umbrella will go for the first option when you remember that most people will go for the umbrella with the biggest take home pay (albeit only £1 more than another umbrella).

[mogga71]

Right an explanation - which will probably be similar to the umbrellas but may not.

If you are known to be on over £125,000 HMRC are likely to send you a 0L or similar tax code. When that is entered into a payroll system the tax will be correct.

But you can't be sure that an umbrella worker is going to earn £125,000 so it's hard to justify getting HMRC to update the code because all contracts are temporary and not permanent.

And because an umbrella cannot assume that you will be there all 12 months (sidenote - a lot of contractors want every penny they can get now) it's easier on all fronts to operate with the 1250L (now 1257L) allowance and leave the contractor to pay the bill at the end of the year.

Now the umbrella should probably make it clear that if you income exceeds £100,000 additional tax will be owed but that may well be hidden within some documentation you've already received (if it's not I would suggest they add it as a line on any illustration provided) but I can see why they may not want to.

but basically once you start earning over £600 a day inside IR35 you have 2 options

1) Use a 1257L code and save £2500 to pay a forthcoming bill
2) use a 0L code and potentially get a refund in April / May.

And you can see why an umbrella will go for the first option when you remember that most people will go for the umbrella with the biggest take home pay (albeit only £1 more than another umbrella).

Many thanks eek ... that makes perfect sense for me being with an Umbrella Company....however I would not have expected my permie wife's employer (an Investment Bank) to have made the same 'error'....and as mentioned before, HMRC have always owed her money in the past.