2022/2023 - PAYE person who's been placed in Self Assessment - Need HELP!!!

All, I've been a self-employed person in the past and closed down my Self Assessment account in 2018. Since then I have gotten several 'rogue' Self Assessment requests for years like 2019, 2020, 2021 - so I've had my fair share of back and forth with HMRC to try and sort these out, cancel penalties etc. Recently I started getting 2023/2023 tax year prompts, so I innately assumed 'here we go again', but I eventually spoke to someone at HMRC who advised that this one is indeed genuine and is solely because I made more than 100k in PAYE salary for that tax year, and the rules at that time meant that you had to submit a Self Assessment return - how I was meant to know this, I'll never quite grasp... Here's where I need your help!!! I'm not a tax calculator whizz, but these numbers shocked me a little. Total income received - £117,449.00 Tax Deducted (Total for the year - £34,408 Tax Code on P60 for that year - 1257L When I punch these details in, they come back saying that I owe - £3,493.20 in Income Tax. Can someone explain this calculation to me, or advise if something looks 'wrong' here. To be short almost £3.5k in tax seems excessive, especially when all my taxes come out as part of usual payroll in a PAYE fashion - how could there be such an error? I would sincerely appreciate your help!!! Stephen

Not HMRC, tax acct. Its because your code is giving you full personal allowances, when, as you are over £100k your allowance is partially lost for the year, i.e. tapered above £100k until its lost altogether, on £117449 you keep some allowance, but not all of it.

...thought Id give you figure/calculation...(£117449 above £100000 ) = 17449 / 2 (tapered at allowance restirction of £1 for £2 above limit) is £8724.50 lost @ 40% = £3489.50 tax due. Difference to your figure of £3493.50 is £3.70 which is a PAYE rounding figure.

Thank you dearly for this explanation. In short, are we saying that I essentially had the wrong Tax Code and therefore I was being granted full personal tax allowances, which was incorrect, is that right? I’m just wondering how I could have avoided this. A £3.4k underpayment whilst being a PAYE tax payer, just seems like an extreme miss. When my salary changed in Mar-Apr 2022 which took me over 100k, should I have called HMRC and led this, or is there an expectation that this just happens automatically?

Hi,

It is likely that the additional £3493.20 due comes from the reduction in your allowances when your income exceeds £100,000. For every £2 your earn over £100,000, you lose £1 of your tax free allowances. So with your income of £117,449, you would lose £8724.50 of your tax free allowance. This then means £8724.50 previously tax free needs to be charged at the basic rate of 20%, and £8724.50 previously charged at basic rate needs to be charged an additional 20% to make up the higher rate of 40%. So (8724 x 0.2) x 2 = £3489.80.

Please note that while this reduction in allowances would usually be dealt with automatically in your tax code, one off payments in your wage or second sources of income may make it more difficult for the tax code to adjust. If you would like us to check your calculation, please contact our Self Assessment team.

Self Assessment: general enquiries

Thank you.