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trying to sort income tax

Practical Issues
steelman99
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trying to sort income tax

#256638

Postby steelman99 » October 8th, 2019, 6:31 pm

all last year I had on my payslip a taxable income of 54,592.53 ( Usual gross wage was around £3k per month, but I retired and extra taxable payments of £19353 were made in the last month of the tax year)

I paid £10k net into my pension , and the scheme reclaimed £2500 tax refund

To my sums -I therefore had a taxable income of £44592, which with a tax code of 1145L meant I should pay income tax on £33142.23 at 20% in total £6628.40 , however for the year I paid tax of 12,756.35

Bit confused when the tax man says my rebate should be £2400 - can anyone explain where I've gone wrong in my sums ( If I Have) ?

pochisoldi
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Re: trying to sort income tax

#256645

Postby pochisoldi » October 8th, 2019, 7:05 pm

steelman99 wrote:all last year I had on my payslip a taxable income of 54,592.53 ( Usual gross wage was around £3k per month, but I retired and extra taxable payments of £19353 were made in the last month of the tax year)

I paid £10k net into my pension , and the scheme reclaimed £2500 tax refund

To my sums -I therefore had a taxable income of £44592, which with a tax code of 1145L meant I should pay income tax on £33142.23 at 20% in total £6628.40 , however for the year I paid tax of 12,756.35

Bit confused when the tax man says my rebate should be £2400 - can anyone explain where I've gone wrong in my sums ( If I Have) ?



You've got the gross and net pension contributions mixed up, and also made a mistake on how pension tax relief is given.

The gross contribution figure is used to increase your 20% band, so that 20% tax is deducted from you (and reclaimed by the pension scheme), and avoids 40% tax.

The actual tax due is calculated as follows

Gross income £54592 less personal allowance* £11450 leaves £43142 to be taxed.
Your basic rate band is £34500 plus the gross amount of pension contributions £12500.
So your total basic rate band is £47000.
This exceeds your remaining income, so £43142 gets taxed at 20%, and the tax due is £8628.40.

This calculation only looks at this single source of income, takes into account your tax code (1145L which is less than the normal 1185L code for 2018/19) and ignores any other tax which may be due (e.g. pensions etc)

I'm not sure where the tax paid figure of £12756.35 comes from.
Your PAYE tax from that employment would have been
Tax free: 11450
20%: on £34500 = £6900
40%: on £8642.53 (54,592.53 less 34500 less 11450) = £3457.01
Total: £10357.01

Looks like there's an extra ~£6k of income which has been taxed there.

PochiSoldi

Paupertas
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Re: trying to sort income tax

#256913

Postby Paupertas » October 10th, 2019, 11:12 am

I've just run this through my software and I assume that we are talking about the 2018/2019 tax year. It gives the following:

Total income £54,592, less personal allowances of £11,850, giving taxable income of £42,742. All of this is taxable at 20% giving a liability for the year of £8,548.

An on line tax calculator gives tax deducted of £14,937 on a salary of £54,592. I'm not approved to post links but google for listentotaxman.com and run the figures yourself to check this.

Where the £12,756 comes from is a bit of a mystery, as is the refund of £2,400. I suspect that there may be something for past years in the mix here.

Have you got an on-line accounts with the government - called a gateway. If you set one up you should be able to get more detail. You may, by now, have been sent a P800 which will give a breakdown of your income for 2018/2019.

Just one more thought on this - how did HMRC become aware of your pension contribution? Was this a one-off?

Kantwebefriends
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Re: trying to sort income tax

#257025

Postby Kantwebefriends » October 10th, 2019, 9:20 pm

I paid £10k net into my pension

And did you report the corresponding GROSS amount to HMRC?

i.e. you should have reported a contribution of £12,500 gross.


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