If you are one of five and a half million people who over or under paid tax last year, you could be the victim of a blunder by the taxman.
Millions of people have been sent new demands or been issued repayments for overpaid tax in recent months after the taxman was forced to recalculate what people owe. But it has emerged that this second round of calculations was also flawed and needs to be reviewed.
David Whiscombe, tax technical director at BKL Tax, said a “K” code is issued where a PAYE taxpayer has other taxable income which exceeds the personal allowances to which he or she is entitled. It’s especially likely to be issued where a taxpayer’s PAYE income exceeds the level at which the personal allowance is withdrawn altogether, currently £120,000. If this is the case, HMRC have made an inexplicable mistake as to your wife’s expected income.
However that’s not the only instance when a “K” code can be issued. It could be that HMRC is trying to collect tax on her property income through the PAYE system.
“If this is the explanation, you can insist that HMRC does not collect the tax in this way but instead does so at the end of the year when your wife files her tax return,” Mr Whiscombe said.
“As PAYE codes are generally prepared in tandem, this year and next, it would be very worthwhile checking that HMRC’s misconception has not been carried forward to your wife’s anticipated PAYE coding notice for the coming tax year ending 5 April 2016, otherwise she may have to repeat the exercise.”
Your wife can contact HMRC to sort this out by phone, email or letter. She will need to supply details of the PAYE coding notice, her National Insurance number, 10-digit unique taxpayer reference number and her employer’s PAYE Reference number.
If she phones, expect a considerable delay before the call is answered, especially at peak times: but this is still likely to be the quickest way to solve the problem.
Alternatively you can email HMRC or write to them, but neither of these are likely to provoke a quick response.
It may be that one month’s salary will be subject to a higher tax deduction owing to the K code while matters are resolved, but this will be corrected (effectively repaid, by a reduction or repayment of tax) via the payroll in the following month when the amended code is used. Thereafter, tax deductions should return to a more stable level for the remainder of the year to 5 April 2015.