Reply to: Underpayment of tax by PAYE

[Paralytic]

Am I right in thinking that the LTD should simply have issued a P45, that was then provided to the PAYE/Umbrella?
And that would have been the end of it?

Alternatively, HMRC online can be used to change expected income etc and that would result in a change of tax code.

[SueEllen]

Am I right in thinking that the LTD should simply have issued a P45, that was then provided to the PAYE/Umbrella?

Yes

And that would have been the end of it?

Could have still ended up on the wrong tax code.

Not hard to sort out after checking payslips.

[eek]

Am I right in thinking that the LTD should simply have issued a P45, that was then provided to the PAYE/Umbrella?
And that would have been the end of it?

Yes.

[Lance]

Sorry but this is on you. You shouldn't be on a tax code for that long and it's your responsibility to know that's wrong and change it with HMRC. You can't rely on other people to do it for you when you know you are on an emergency code. You've dropped the ball here I am afraid.

Am I right in thinking that the LTD should simply have issued a P45, that was then provided to the PAYE/Umbrella?
And that would have been the end of it?

[northernladuk]

I was on BR tax code (emergency tax code) for whole of the year. Even after my income, that I received, reached above 150K, HMRC did not issue me any new tax code. They kept me on the BR tax code only.

Sorry but this is on you. You shouldn't be on a tax code for that long and it's your responsibility to know that's wrong and change it with HMRC. You can't rely on other people to do it for you when you know you are on an emergency code. You've dropped the ball here I am afraid.

[northernladuk]

Like other said, I've had the same and it was the fact still on company payroll. Its by design, my accountant says they have a few people on BR codes due to multiple employments then get a massive tax bill at the end of the year to settle. Just how it works.

For people mixing inside and outside roles, extra care needs to be taken to make sure don’t end up on BR code. I was at one point when learning this for myself and got it changed so I could pay off the tax each month rather than bill at the end of the year.

Any chance you an stop using the small text? It's difficult to read.

[Keanu2020]

Like other said, I've had the same and it was the fact still on company payroll. Its by design, my accountant says they have a few people on BR codes due to multiple employments then get a massive tax bill at the end of the year to settle. Just how it works.

For people mixing inside and outside roles, extra care needs to be taken to make sure don’t end up on BR code. I was at one point when learning this for myself and got it changed so I could pay off the tax each month rather than bill at the end of the year.

[eek]

You are responsible for your own tax code, not HMRC. If you have an advisor who has made a mistake, you could feasibly go after them, but HMRC will be expecting their tax (quite rightly IMO). However, it looks like you don't have an advisor, and you have made a mistake (by not being aware of or ignoring your payslips). If you explain things to HMRC, i'd hope they'd give you time to pay back (perhaps a couple of years)/

Some reading for you

https://thetaxrefundcompany.co.uk/yo...esponsibility/
https://www.gov.uk/tax-codes/emergency-tax-codes

Note that BR is not really an emergency tax code (though many people do call it that) - it is a temporary tax code where all income is taxed at the nominal rate (20%) until you/your employer provide additional information so that the correct tax code is used.

Being 100% correct - the following are emergency tax codes

• 1257 W1 (weekly pay)
• 1257 M1 (monthly pay)
• 1257 X (emergency we've lost the previous figures so don't have a starting figure to work from)

And the following codes are overrides because you have another job that results in you being paid at this level

BR	All your income from this job or pension is taxed at the basic rate (usually used if you’ve got more than one job or pension)
D0	All your income from this job or pension is taxed at the higher rate (usually used if you’ve got more than one job or pension)
D1	All your income from this job or pension is taxed at the additional rate (usually used if you’ve got more than one job or pension)

SBR	All your income from this job or pension is taxed at the basic rate in Scotland (usually used if you’ve got more than one job or pension)
SD0	All your income from this job or pension is taxed at the intermediate rate in Scotland (usually used if you’ve got more than one job or pension)
SD1	All your income from this job or pension is taxed at the higher rate in Scotland (usually used if you’ve got more than one job or pension)
SD2	All your income from this job or pension is taxed at the top rate in Scotland (usually used if you’ve got more than one job or pension)

CBR	All your income from this job or pension is taxed at the basic rate in Wales (usually used if you’ve got more than one job or pension)
CD0	All your income from this job or pension is taxed at the higher rate in Wales (usually used if you’ve got more than one job or pension)
CD1	All your income from this job or pension is taxed at the additional rate in Wales (usually used if you’ve got more than one job or pension)

And these codes do exactly what they say on the tin - they don't give you any starting allowance and tax all income at 20%, 40% or 45% regardless of the fact you may go into the next band.

As I said before the issue comes down to the fact the OP didn't close his company payroll down and the issue wasn't fixed by anyone.

[Paralytic]

You are responsible for your own tax code, not HMRC. If you have an advisor who has made a mistake, you could feasibly go after them, but HMRC will be expecting their tax (quite rightly IMO). However, it looks like you don't have an advisor, and you have made a mistake (by not being aware of or ignoring your payslips). If you explain things to HMRC, i'd hope they'd give you time to pay back (perhaps a couple of years)/

Some reading for you

https://thetaxrefundcompany.co.uk/yo...esponsibility/
https://www.gov.uk/tax-codes/emergency-tax-codes

Note that BR is not really an emergency tax code (though many people do call it that) - it is a temporary tax code where all income is taxed at the nominal rate (20%) until you/your employer provide additional information so that the correct tax code is used.

[SueEllen]

If your limited company is still open or recently closed then you should be doing self-assessment anyway.

That means if you have paid too little tax through PAYE for that year you pay the rest when you do your self-assessment return.

[eek]

I was on BR tax code (emergency tax code) for whole of the year. Even after my income, that I received, reached above 150K, HMRC did not issue me any new tax code. They kept me on the BR tax code only.
Contrary to that, this year they have revised my tax code 3 times so far as my income changed but not last year.

did you ever notify HMRC that your limited company had stopped running a payroll? As that’s the only reason why you would be on a BR tax code (because you have multiple jobs).

Edit now I know the code it seems like the issue can be pinned back on you so I wouldn't be trying to get HMRC to do much beyond given you some time to pay.

[WTFH]

I was on BR tax code (emergency tax code) for whole of the year. Even after my income, that I received, reached above 150K, HMRC did not issue me any new tax code. They kept me on the BR tax code only.
Contrary to that, this year they have revised my tax code 3 times so far as my income changed but not last year.

So, you're saying that for the year 04/20-04/21 you never looked at or questioned your payslip once, even though you used to run an Ltd and would have understood how to check things?

I'm slightly confused by your deliberate vagaries of "Payroll Company ABC started behaving as PAYE Company"
Are you saying
1. You were direct with the client, not through any agency?
2. You invoiced the client, but the funds went to a payroll company?
3. You invoiced the payroll company, who invoiced the client?
4. Something vague?

[NoviceContractor]

Sorry but I don't believe HMRC would have issued a tax code that resulted in you paying too little tax. Equally unless you were on emergency tax you shouldn't have got into this state. But that's irrelevant, as the buck and the bill stops with you.

And while you can probably get some time to pay you will need to pay the unpaid tax asap and HMRC will be charging interest on it.

I was on BR tax code (emergency tax code) for whole of the year. Even after my income, that I received, reached above 150K, HMRC did not issue me any new tax code. They kept me on the BR tax code only.
Contrary to that, this year they have revised my tax code 3 times so far as my income changed but not last year.

[eek]

Prior to Apr-20: End Client -> Payroll Company ABC -> My Ltd Company -> Me
Apr20 to Apr 21:End Client -> Payroll Company ABC started behaving as PAYE Company -> Me
Apr 21 till date: End Client -> Payroll Company ABC -> Umbrella Company -> Me

All this time, I was working for same end client, the Payroll Company has been same, my rate has been same.

Hi,
They deducted less tax because of the tax code they received from HMRC.

Sorry but I don't believe HMRC would have issued a tax code that resulted in you paying too little tax. Equally unless you were on emergency tax you shouldn't have got into this state. But that's irrelevant, as the buck and the bill stops with you.

And while you can probably get some time to pay you will need to pay the unpaid tax asap and HMRC will be charging interest on it.

[cojak]

Well, call HMRC (you'll need to anyway) but I very much doubt that you'll be able to get out of paying the back tax.