As HM Revenue & Customs works hard to collect £2 billion in unpaid tax from 2008-09 and 2009-10, accountancy firms have noticed that they are seemingly ignoring the latest self assessment tax returns submitted by taxpayers. Many of the tax calculations which are being received by taxpayers don’t take into account the information already provided in tax returns.
HMRC appear to be basing current year tax codes and income on the previous year’s Pay As You Earn figures, whilst totally disregarding the fact that a self assessment tax return has been submitted. PAYE should work in conjunction with self assessment to ensure calculations and tax codes are accurate, but this doesn’t appear to be the case for many taxpayers.
Basing calculations on the income in previous years can be especially detrimental to pensioners who may have reduced their income considerably. Including large amounts of income will have an effect on the age allowances received, resulting in large tax bills.
If you receive a tax demand, take care to check all the figures carefully and if you agree with the calculations, you may want to pay the tax owed either in one lump sum or through the next year’s tax code. If a self assessment tax return has been submitted to HMRC, this should be used to calculate your current year’s tax code, and any errors should be reported to HMRC as soon as possible to be rectified. Low cost accountants will be able to deal with HMRC on your behalf, ensuring you pay the correct amount of tax.
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Disclaimer: The information contained in these articles is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.