Query re underpayment of tax and overpayment of wages

[jorainbow]

Good afternoon

Just a query re the above. I started my current employment on 8 May so was paid by my previous employer until that date using my personal allowance. It transpires that my new employer also used my personal allowance so I have underpaid tax ( I found this out by calling HMRC). In the next month I gave my new employer my P45 but they neglected to take the M1 code off so I have also been paying month 1 tax. I am leaving their employ but as they are a school and have already run payroll they have calculated the amount I owe with leaving a week early by deducting one payslip from the other. Whilst I have no issue with paying back what I owe, how can it be correct if my tax isn't? Just very confused! Can anyone shed any light on this!!!

Thank you

[ULA]

Re: Query re underpayment of tax and overpayment of wages

Don't worry tax can be quiet confusing.

What appears to have happened is that when you started your new employment they put you on the payroll without the benefit of your P45 from the job you left, so they would have set you up as an employee without a P45 on their payroll system, when you provided them with it the following month they did not change their system. What they will need to do is re-run the calculation of what you should have been paid for the month having left early with the correct tax code and deduct that from what they actually paid to determine the overpayment.

If there is any issue with the tax situation, as information is given to HMRC on what is called a real-time basis when you have your next salary from your new employer with the details from your P45 it will work through whether there is any tax owing and adjust your tax code accordingly.

[jorainbow]

Re: Query re underpayment of tax and overpayment of wages

Thank you Ulla - they have not applied my correct tax code before re running the payroll though so I am still shown as a month 1. I haven't been paid yet but because they are a school the wages run has already been sent to the bank with my incorrect tax code which I why I wondered how they can know exactly what my overpayment is!!! Does that change anything?

[ULA]

Re: Query re underpayment of tax and overpayment of wages

Agree the net amount of the salary overpayment and agree to repay that element.

When they complete your P45 they will have to give details of your pay to date and tax paid to date. If there is an adjustment to be made for the amount of tax you have paid then when you start your new employment and after the first payroll has been run, because the information goes real time to HMRC, they will calculate whether you have over or underpaid tax and adjust your code accordingly. They will then notify you and your employer who will change your code for the next payroll run.

[ostell]

Re: Query re underpayment of tax and overpayment of wages

If they have already given you a P$% then they are not allowed to give another. I would tell the about to be old employer that you agree there is a discrepancy, part of which was was caused by their failure to apply the correct tax code. You will therefore prefer to wait until it has all stabilised with your new employer and then the correct amount can be worked out.