Self assessment tax return - overpayment

dyziodyzio New MemberPosts: 35Registered, MAAT, AAT Licensed Accountant
Hello, please help me with this, I have been left really confused:

My client was claiming marriage allowance for 2016-17 but cancelled it in June 2017 for tax year 2017-18 as she wasn't entitled to it any more. She started tax year with the code 1265M which then changed to 1122L m1 to collect the underpayment.

Client earned £46228 from employment with £4k dividends, total £50228. Tax due on that was £7,191.20 plus High Income Child Benefit of £35, total tax due £7,226.20.

Her P60 shows tax paid as £7,456, giving an overpayment of £229.80.

HMRC thinks she owes £38.40 from this tax year due to the marriage allowance, and deducts it from her overpayment, leaving repayable amount of £191.00. They said that this was collected in her tax code and needs to be added to tax calculations.

Isn't she is effect paying £38.40 twice? Once through her tax code and second time as a deduction from overpayment due? Or am I missing a trick here? I've been thinking about it and my head hurts. Please help.

Thanks!

Comments

  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderPosts: 1,461Moderator, MAAT, AAT Licensed Accountant
    Hi @dyzio
    It's not clear where the £38.40 comes from - is this underpayment relating to 2016-17 or 2017-18?

    I would assume your client is in self assessment due to the HICB charge - in this case if you have all available data submit a SATR for 2017-18 and it will show the correct tax due/overpaid (if the underpayment relates to an earlier year make sure you enter it on the return).
  • dyziodyzio New Member Posts: 35Registered, MAAT, AAT Licensed Accountant
    Hi MarieNoelle,

    This underpayment is from 2017-18. At the beginning of tax year she had a code 1265M which included marriage allowance. When the marriage allowance was cancelled, she had an underpayment of £38.40. So HMRC changed the code to 1122L M1 to collect it.

    At year end, she has an overpayment as per return on £229.80 and HMRC is taking this £38.40 and repaying only £191. I calculated it all manually as well as using software, and as per my calculations she should receive £229.80. Simply she should have paid £7226.20, she paid £7456.00 as per her P60. Why is HMRC taking this £38.40?

    She paid all her tax for 2016-17, so no underpayment there.

    Still confused...
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderPosts: 1,461Moderator, MAAT, AAT Licensed Accountant
    So I would agree with you that the tax is correct for 2017-18 as per your calculations. Have you tried to speak to someone at HMRC ?
  • dyziodyzio New Member Posts: 35Registered, MAAT, AAT Licensed Accountant
    I am actually on the phone to them now, I am told there are problems with their 2017-18 system... When you go to section of underpayment, and it shows you have an underpayment for 2017-18, and you override it and put 0 (because there isn't one), it doesn't register on HMRC site. I am looking at my client's return telling them what I have as tax due, and they have tax due higher by this underpayment amount. And I thought I was going bonkers! :)

    A lovely chap is sorting it out for me, and getting my client the £38.40 back! :) Whoop whoop!

    Thanks for replying MarieNoelle.
    MarieNoelle
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderPosts: 1,461Moderator, MAAT, AAT Licensed Accountant
    I am told there are problems with their 2017-18 system


    Nothing new then...
    BeccaLouJ9
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