Thursday, 26 January 2012

Income Tax ... it's a wonderful way to ruin your day!

I had just finished doing all my household chores, and had got all the stuff out that I needed to begin building a couple of model ships to illustrate a 'How to ...' blog entry I was going to write ... when the post arrived ... and ruined my day.

One of the envelopes was a large A5 brown one, with the words 'H M Revenue & Customs' on the front. I opened it to find that it contained my PAYE (Pay As You Earn) Tax Code for the forthcoming year ... and that my personal tax allowance (i.e. how much I can earn before I begin to pay Income Tax) had been reduced from £8105 to £1399! This would have meant that I had to pay an extra £112 per month in Income Tax next year.

I immediately contacted the HM Revenue & Customs Helpline ... only to hear a recorded message that told me they were too busy to answer my phone call and requesting me to call back later. Undismayed I kept phoning until I finally got into the queue ... which I then stayed in for over 45 minutes. When I eventually spoke to a tax adviser he told me that the reason for the reduction of £6706 in my tax allowance was due to an estimation by HM Revenue & Customs that I would need to pay the higher tax rate for some of my income during the forthcoming year.

I went through the figures on my self-assessment tax form for 2010-11 (the year they have based the estimation on) and the tax adviser agreed that I had not needed to pay the higher rate tax during that year. We then went through my estimated earnings for 2011-12 (which was less than I earned in 2010-11), and he agreed that there was no danger of me needing to pay Income Tax at the higher rate during 2011-12. He went through my file, and after some thought agreed that the tax code I had been sent was wrong and that I new one would be sent to me during the next week of so.

All of the above took me nearly two and a half hours ... and by the time I had finished I was in no mood to do any modelling. As the title of this blog entry states, 'Income Tax ... it's a wonderful way to ruin your day!'

PS. The tax adviser did explain how HM Revenue & Customs made their estimations of future earnings. Apparently they estimate that people paying tax will have a 3% year-on-year rise in income, regardless of the current economic situation. They obviously know something that the rest of us don't know!

16 comments:

  1. Hi Bob,

    That is terrible, all that time, effort and worry over something that they should have been on top of.

    The MHWC has also had to register for tax as we run the Broadside show but, it turns out, that any and every club should register with the tax people from day one whether you owe tax or not. There nust be thousands of clubs and societies out there that don't know this but can keep under the radar...its a bit hard to hide a large wargame show!

    Glad things have worked out, hopefully you can get back to the wargames soon. Have a glass of gin and think how bad it could have been if you were not on the ball; I know plenty of people that do not even know what theit tax code is! Very worrying.

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  2. Bob,
    After trying to help my wife's grandmother sort out her Pension Credit claim with DWP I can but sympathise!
    Personally, when dealing with the Working Tax Credit/Child Allowance department I have given up telephoning and rotting my brain with their muzak and repetitive recorded announcement - I just post a letter, which is cheaper than a lengthy phone call and far less emotionally exhausting/time wasting.
    In one of my letters I commented that I suspected there was a cunning plot to keep clients hanging on the phone to increase revenue from VAT thereon - needless to say, I did not receive a reply to that point, so next time I think I shall enquire whether their failure to deny my allegation should be taken as an admission...

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  3. I've still got to finish my tax return for 2010/11 (only a few days to go). What a pain.

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  4. The worst tax cock-up I suffered was caused by my former employer (a large accountancy firm...) failing to ensure I had the correct tax code....

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  5. Don't mean to brag but I got a £5k tax rebate recently.

    It came in handy!!

    Jim

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  6. Leofwine Wargamerson,

    What concerned me most was the difficulty in getting to speak to someone ... and the fact that most of the problems with my tax code were due to assumptions programmed into the HMRC computer. It appears that there no physical checks made on the codes unless the taxpayer raises objections.

    Had I been older and less able to understand how bureaucracy works, I might have ended up paying far more tax than I needed to at a time when I needed every penny I had.

    I have now calmed down a bit, and hope to do some modelling later this evening … but this was an avoidable problem that I just did not need today (or any other day, for that matter!).

    All the best,

    Bob

    PS. I wrote to HMRC about Wargame Developments some years ago and pointed out that we did not run the organisation for profit, nor did we organise any profit-making events. I never heard anything back from them and I assume that we are registered with them.

    All the best,

    Bob

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  7. Arthur1815,

    I have the battle over my State Pension yet to come! I understand that this will also impact upon my tax code, and no doubt I will spend even more hours on the phone trying to sort that out.

    Some years ago I had a major problem with my Income Tax. I kept being sent tax forms on a monthly basis to fill in, which I returned as requested. After six months I then got a very nasty letter demanding that I fill yet another tax form in BECAUSE I HAD NOT DONE ONE (!!!) and threatening me with a very large fine if I did not comply. At this point I telephoned the tax office and spoke to someone, who told me that they were confused because I kept sending in tax forms, which they were filing. I asked why I kept getting letters and demands to fill in tax forms … and then they person I was speaking to realised that those letters were coming from a different section in the tax office. Eventually my forms were sent to the right section, but since then I have always phoned as I don’t trust them to deliver my letters to the right people.

    I agree that it does feel that one is being held in a queue for some ulterior motive, although I am not quite cynical enough yet to think it is being done to earn HMRC more money!

    All the best,

    Bob

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  8. Dan B,

    Get it done ASAP! I know that they have extended the deadline by a couple of days, but I would not want to risk the fine and all the bureaucratic nonsense that will follow.

    All the best,

    Bob

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  9. I've just had a meeting with my accountant. Apparently your story is far from rare!

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  10. Tim Gow,

    That is truly unforgiveable … although it is not that unusual.

    It was a mistake by my accountant that caused me a lot of bother with HMRC a few years back when they made a mistake calculating my National Insurance contributions one month (they gave me a refund, which I queried … and was then told that there was no problem and that I should just forget the matter). This came it light when I had a visit from the tax inspectors, who agree that it was not my fault (‘We will not impose a fine on you this time’ was what the lead inspector actually said!) but who made me pay – in full – the ‘missing’ amount within 14 days.

    Needless to say, the accountant and I had a full and frank discussion about what had happened, and my charges that year were somewhat less than normal.

    All the best,

    Bob

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  11. Jim Duncan,

    If I were you I would put it somewhere safe and not spend it ... they will probably ask for it back in a couple of weeks time!

    All the best,

    Bob

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  12. Tim Gow,

    You do not surprise me. For the last three years I have had to battle with HMRC to get my tax code right. Last year I ended up owing them £2.10 ... which they had the nerve to ask me to pay! This is despite the fact that they owed me £1.80 for the previous two years, but which they said was too small an amount to bother with!

    I do not actually blame the tax inspectors and advisers as most of the problems seem to be a result of the ‘new’ computer system which has churned out millions of incorrect tax codes and assessments since it was introduced, resulting in some people paying far too much tax and other paying nowhere near enough.

    I bet that the computer system was supplied by the cheapest bidder rather than the best. If you pay peanuts …

    All the best,

    Bob

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  13. Bob,

    Whilst I take your point about letters, they have the advantage that they provide hard evidence of communication, whereas telephone calls can be forgotten, misremembered or denied altogether.

    I'm not completely convinced by the argument 'pay peanuts - get monkeys' when applied to personnel; there is a great deal of evidence - eg Mps, Premier League Footballers, movie stars and Fred The Shred - that you just get expensive monkeys!

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  14. Arthur1815,

    I take your point about letters ... which is why I have followed up my phone call with a letter that 'confirms' the things I discussed with the tax adviser.

    As to peanuts and monkeys ... well your examples do seem to prove me wrong ... and then RBS go and support your argument by giving their chief 'monkey' a huge number of shares!

    All the best,

    Bob

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  15. As I read your post, I kept thinking of the scene in 'Brazil', where the stenographer is typing "AaaaaaaaaaaaaaRGHHHHH!!!"

    regards, Chris

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  16. Chris Kemp,

    I must admit that there were times during that two and a half hours when it felt like that!

    All the best,

    Bob

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