Taxpayers have been urged to check their details are correct
Taxpayers have been warned about HMRC messages going out over amounts that are due to be paid. It’s good practice to regularly check over your details with the HMRC, or you could pay the wrong amount of tax. The tax department recently reminded customers that “everyone is responsible” to make sure they are on the right tax code.
Experts at digital tax filing platform Taxfix urged people to keep on top of their finances to avoid a surprise bill from the taxman. Senior director Oliver Harcourt said: “The best protection is staying organised.
“Keeping records up to date, checking your tax code, and setting money aside if your income varies. Submit returns early and before payment on account due dates. Reviewing HMRC messages can also prevent surprises later on.”
He also said it’s important to keep an eye on your taxes so you don’t pay too much. Mr Harcourt said: “Remember that while you want to avoid owing HMRC and accruing fines, you also don’t want to be in a position where you’ve overpaid HMRC and it goes unnoticed. Filling out the forms accurately is essential to avoid HMRC making incorrect assumptions about how much you owe.”
The expert said one case where you could end up not paying enough tax is when you move from the threshold for needing to file a self-assessment tax return. He said: “In most cases HMRC isn’t aware that your circumstances have changed, so they won’t notify you.
“It’s up to the individual to understand whether they now need to file. Many people simply don’t realise they’ve crossed that line.” Asked how HMRC will get in touch if you owe them some cash, Mr Harcourt said: “HMRC usually gets in touch by letter or through your online tax account.”
Another case where you may not realise you need to pay more tax is once your income moves above £100,000 a year. This is because once you earn above this amount, you start to use your personal allowance.
You lose £1 of the allowance for each £2 you earn above this threshold, meaning you get no allowance and pay income tax on all your income once you reach £125,140. One curious feature of the system is that the late payment interest rate if you owe HMRC an amount is set at the Bank of England base rate, plus 4 percentage points, while the repayment interest if HMRC owes you some cash, is set at the base rate minus one percentage point.
With the base rate currently at 3.75 percent, the late payment interest is currently 7.75 percent while the repayment interest rate is just 2.75 percent. Mr Harcourt said the relatively high late payment rate does make sense.
He said: “It’s reasonable in principle, because HMRC shouldn’t be treated like a bank or an overdraft facility. That said, it can feel unjust in practice, because many late filings or underpayments aren’t the result of deliberate behaviour but of how complex the tax system has become.
“When genuine mistakes are penalised at the same rate as deliberate non-payment, it’s understandable that taxpayers feel the system is stacked against them.”
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