Input PAYE underpayments in Personal Tax
To deal with PAYE underpayments occurring between years you will need to use the
Underpayments
dialog. This can be accessed via the Information Explorer
in the Others
folder, or via Edit | Schedule Editor | Employments
or Pensions and State Benefits
dialog.note
Your client will need to have a current PAYE source (Employment or Pension) in order to add an underpayment adjustment. If a PAYE source has ceased, then the column will not roll forward to future years and in the tax year it ceases, it will show with an asterisk and a note at the foot of the screen advising it ceased in year. You can either move the adjustment to another source column if applicable, or if there is no longer any PAYE source, your client may need to arrange payment with HMRC.
PAYE underpayment bought forward and included in the current year tax code (Box 7 SA110):
- Show the underpayment brought forward in the first box, calledUnderpayment BF(this will be automatic if you have entered the amount as a carry forward in the prior year’sUnderpaymentsdialog), and enter the amount as(PY) Coded in current year.
- Your client's computation will now be adjusted to accommodate this tax and the figure will be shown in box 7 of SA110.
Current year tax underpayment which you wish to code out instead of settling on 31 January:
- Assuming a tax bill of £1000, enter the liability in(CY) Coded in[year of assessment +2].
- You will also need to go toEdit | Schedule Editor | Other Return Information |Refundstab and ensure the tick boxDo not collect 201x/1x unpaid tax via tax code adjustment in 201x/1xis NOT ticked.
- Your tax return Tax Calculation pages SA110 will still show £1000 in box 1, but you will see that payments on account (box 11) are now showing as £nil, and that your tax computation shows that there is no tax becoming due 31 January.
note
Please note that whilst you may elect for a liability to be coded in a later year, Personal Tax will not automatically make the appropriate entry in the later year's underpayments dialog as it is not uncommon for HMRC to allocate underpayments to incorrect years and so user intervention is required.
Current year PAYE underpayment already coded into next year’s tax code (Box 8 SA110):
- Enter the amount as(CY) Coded in[year of assessment +1]. Your client's computation will now be adjusted to accommodate this tax and the figure will be shown in box 8 of SA110.
- The final line isUnderpayment CFand this will carry forward any balance to the next tax year.
- A detailed list of all entry types is shown below:
- Ceased Column
- Where income sources ceased in the previous tax year, and where instances of underpayments had not been set against other income sources, the outstanding underpayment is brought forward.
- Underpayments BF
- On the first occasion that you create an underpayment, enter the amount outstanding for all prior years in respect of all instances of employments in their respective rows. In subsequent years, these figures will be automatically brought forward.
- Transfer underpayment from
- Only enabled for sources that have ceased in the current year of assessment. Enter any underpayment amounts that have been transferred from one income source to another.
- Transfer underpayment to
- This row is enabled for all sources. Enter here any underpayments that have been transferred from other sources.
- Underpayment outstanding
- Calculated from Underpayments BF - Transfer underpayment from + Transfer underpayment to.
- Paid to HMRC
- Enter amounts that have been recovered by direct payment to the HMRC as opposed to via an adjustment to the PAYE code number.
- Net underpayment
- Calculated from Underpayment brought forward - Paid to HMRC.
- (PY) Coded in current year
- Enter underpayment that has arisen in prior years (or ceased year) being collected in the current year.
- Current year balance
- Calculated from the sum of the amount brought forward less the amount collected in the current year.
- (CY) Coded in [year of assessment +1]
- Enter underpayments that arise in the current year that will be collected via PAYE in the immediately following year of assessment.
- (CY) Coded in year of assessment +2
- Enter underpayments that arise in the current year that will be collected via PAYE in the year of assessment that is two years after the end of the current year of assessment.
- Underpayment CF
- Total amount carried forward to the next year of assessment, Underpayment BF.
- Outstanding Debt included in Tax Code
- Only enter a figure in this box if there is a figure of the same description on the Coding Notice.